What is benchmarking?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
Benchmarking is the process of comparing a business's results with those of similar businesses in the same industry. It usually compares ratios rather than raw amounts, such as costs as a share of sales, so that businesses of different sizes can be measured against a common standard, called a benchmark.
A ratio is worked out from the business's own figures, for example cost of goods sold divided by revenue, or rent divided by revenue, and then set beside the range seen in similar businesses. A result well outside that range is a prompt to look closer: prices may be too low, a supplier may be charging more than others pay, or some costs may be sitting in the wrong account.
Benchmarking depends on the records behind it. If expenses are coded inconsistently, or a year's figures are incomplete, the ratios compare unlike things. A full year of figures also gives a fairer comparison than a single month, which a seasonal swing can distort.
In Australia
business.gov.au's glossary calls a benchmark a set of conditions a product or business can be measured against, and benchmarking the comparison of your business with similar businesses in your industry. Its guidance on reviewing your financial health points to the ATO's published small business benchmarks as a way to see how a business's figures compare with the usual range in its industry, which can show whether anything needs to change.
Its budgeting guide suggests that a business too new to have its own figures can estimate its industry's average income and costs through market research or industry benchmarking. The financial health guidance also suggests a yearly health check, at a minimum, going through the balance sheet, profit and loss statement, cash flow statement and budget for trends and anything unusual.
Worked example
| Measure | Amount (AUD) | Ratio to revenue |
|---|---|---|
| Revenue | 240,000.00 | |
| Cost of goods sold | 132,000.00 | 0.55 |
| Rent | 26,400.00 | 0.11 |
| Wages | 50,400.00 | 0.21 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Comparing raw amounts with a much larger or smaller business instead of comparing ratios.
- Working out ratios from books that are months behind or have costs coded to the wrong accounts.
- Treating a result inside the industry range as proof that nothing in the business needs attention.
Related terms
Related service
Management and cash-flow reports
Monthly reports that show where the business stands.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Review your financial health
business.gov.au, Australian Government. Current at 16 October 2026, released 20 May 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Create a budget
business.gov.au, Australian Government. Current at 16 October 2026, released 14 November 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.