Question

comment on why "Quality performance should be expressed in financial terms "

Answer 1

Quality of performance of any organization can be measured through physical products, statistical sampling of the output of processes or through surveys of purchase.

In every industry, producing quality products or services is necessary for generating satisfactory profit. It's important to measure quality performance standards to ensure customer retention and expansion of the business. If your production is good and meeting the expectation of the customers, then it will immediately boost the revenue of the firm. Quality products will directly affect the sales unit of the company.

Some of the financial terms that indirectly explains the quality performance of the organization-

1)Operating cash flow-Monitoring the operating cash flows explains the ability to pay for deliveries and routine operating business. This also reveals the operation of the firm and how much they are generating the cash.

2)Customer satisfaction-The net promoter score is the result of calculating the various levels of positive response that customer provides on very brief customer satisfaction surveys. The NPS a simple and accurate measurement of likely rates of customer retention across your revenue base and business growth.

3)Inventory turnover-Inventory flows in and out on a continuously basis. The inventory turnover allows you to know of your average inventory your company has sold in a period. The inventory gives you a real picture of the company's sales strength and production efficiency.

4)LOB revenue vs target- It compares your revenue for a line business to your projected revenue.Tracking and analyzing the actual revenue and expected revenue helps to understand how well a department is going on.