Value for money is the value obtained from purchases or sales of goods and services. Whether a business is buying or selling, it wants to make sure it gets value for money in the transaction. Some businesses may use auditing processes to assess this and determine if they need to change business practices or strategies in order to increase value for money. It can be challenging to calculate in some settings, as “value” is sometimes an abstract concept for certain goods and services.
In value for money calculations, accountants look at the purchase or sale price and determine the benefit. A software program might increase efficiency and generate savings, improve production, or make employees happier, for instance. The accountant could determine whether other programs offer the same benefits, looking at efficiency and effectiveness. In addition, long term projections can be useful for evaluating value for money, as the benefits may be more visible in the far future.
College degrees are an example of a service with long term value. College students receive education and adjunct services, graduating with a degree in exchange for their tuition and fee payments. This degree may not pay off immediately, but could provide immense value for money in the long term by creating more employment opportunities, offering a chance to make a higher salary, and improving quality of life. Colleges and universities can conduct surveys of their graduates to determine how much value for money their degrees offer and to audit their practices to see if there are ways they can improve services to students.
Buyers want to get their money's worth for products and services, looking for the most cost-effective solution to a problem or need. A company offering high value for money can attract customers by showing them how its products and services are superior to those of the competition. In cases where it can be difficult to assess value accurately, reputation can become a critical factor; with college degrees, for instance, the name on the diploma can add value or detract from it, depending on the institution.
Companies selling products and services must cater to buyers to attract new customers and retain existing ones, and thus need to think about how much value their products offer. The goal is to offer products and services consumers are happy with, while also trying to meet the needs of the bottom line to ensure that they can continue to offer a variety of goods.