ACC1001 · Accounting Fundamentals
Business Planning & the Balanced Scorecard
Business Planning & the Balanced Scorecard opens the management-accounting half of the unit. It covers how a business plan flows from mission → goals → strategies → budgets, and why measuring performance from financial numbers alone is too narrow — the balanced scorecard (Kaplan & Norton) adds four perspectives, each with objectives and KPIs. It is examined by applying and explaining: place a measure in the right perspective and argue why non-financial measures matter.
What this chapter covers
- 011. The business plan: mission statement → goals → strategies, guiding decisions and resources
- 022. Strategic (long-term) planning operationalised through short-term budgets
- 033. Why financial measures alone are insufficient (backward-looking)
- 044. The balanced scorecard (Kaplan & Norton): performance from four perspectives
- 055. Financial perspective: how do we look to owners?
- 066. Customer perspective: how do customers see us?
- 077. Internal business process perspective: what must we excel at?
- 088. Learning & growth / innovation: can we keep improving? — plus objectives + KPIs per perspective
Place measures in the balanced scorecard and justify it
- +1(a) Net profit margin → Financial perspective ('how do we look to owners?') — it reports the financial return to the owners.
- +1(b) Customer satisfaction score → Customer perspective ('how do customers see us?') — it measures how customers experience the business.
- +1(c) Average order-to-serve time → Internal business process perspective ('what must we excel at?') — it measures the efficiency of the internal process.
- +1(d) Percentage of staff completing barista training → Learning & growth / innovation perspective ('can we keep improving?') — it measures capability building for the future.
- +2Explain the limitation: financial measures are backward-looking, so relying on net profit margin alone misses the customer, process and learning drivers that shape future performance.
Key terms
- Business plan
- A plan that flows from the mission statement to goals to strategies, guiding decisions, resource allocation and goal-setting. Strategic, long-term plans are then operationalised through short-term budgets.
- Balanced scorecard
- Kaplan & Norton's framework for measuring whole-organisation performance from four perspectives — financial, customer, internal business process, and learning & growth — each with objectives and KPIs, balancing financial and non-financial measures.
- Financial perspective
- The balanced-scorecard view answering 'how do we look to owners?'. It uses financial measures such as profit and returns, but is backward-looking, which is why the other three perspectives are needed.
- Customer perspective
- The view answering 'how do customers see us?'. It uses measures such as customer satisfaction, retention and market share — leading indicators of future financial results.
- Internal business process perspective
- The view answering 'what must we excel at?'. It uses measures of the efficiency and quality of internal processes, such as cycle time, defect rates or service speed.
- Learning & growth perspective
- The view answering 'can we keep improving?'. It uses measures of capability and innovation, such as staff training, skills and new-product development — the foundation for improving the other three perspectives.
Business Planning & the Balanced Scorecard FAQ
Why isn't financial performance enough to measure a business?
Because financial measures are backward-looking — they report on results that have already happened. They tell you the score, but not the drivers that will shape future performance: how customers see you, how well your internal processes run, and whether your people and capabilities are improving. The balanced scorecard adds those three non-financial perspectives so management can see the leading indicators, not just the lagging financial outcome.
What are the four perspectives of the balanced scorecard?
Financial ('how do we look to owners?'), Customer ('how do customers see us?'), Internal business process ('what must we excel at?'), and Learning & growth or innovation ('can we keep improving?'). Each perspective has its own objectives and key performance indicators, and together they sit around the organisation's vision and strategy to give a balanced, multi-dimensional view of performance.
How does business planning connect to budgeting?
Business planning sets the long-term direction — mission, goals and strategies — but those strategies have to be turned into concrete short-term targets to be acted on. Budgets are how strategic, long-term plans are operationalised: they translate strategy into monetary plans for a future period, which is exactly why budgeting (Topic 10) follows planning in the management-accounting sequence.
How do I decide which perspective a measure belongs to?
Match the measure to each perspective's guiding question. If it reports financial return to owners, it is Financial. If it reflects how customers experience the business, it is Customer. If it measures an internal process's speed or quality, it is Internal business process. If it measures capability, skills or innovation that build future capacity, it is Learning & growth. The exam typically gives you a list of measures to sort this way and justify.
Exam move
Treat Topic 8 as the bridge from financial to management accounting and learn the balanced scorecard cold, because it is the chapter's centrepiece. Memorise the four perspectives with their guiding questions (owners / customers / what we excel at / can we improve) so you can sort any measure into the right quadrant and justify it — the exam's standard task. Be ready to argue the why: financial measures are backward-looking, so non-financial perspectives capture the drivers of future performance, including the sustainability, ethics and inclusivity themes the unit emphasises. Understand how planning cascades from mission to goals to strategies to budgets, since that sets up Topic 10. Quote the lecture slides' wording of each perspective for the marking guide.
