Developing useful outcome measures for the treatment of serious mental illness remains an important challenge for the newly re-configured Mental Health Services in the United Kingdom, towards the latter part of the ten year period covered by the National Service Framework. The present authors have taken the opportunity to develop a method for measuring outcomes in psychotic illness while developing a service for Early Intervention in Psychosis. The results are mentioned shown, but will be discussed in detail elsewhere. This article will focus on the development of the method for outcome measurement itself. In particular, we shall argue for the need to use measurements which demonstrate functional improvement and improvement in quality of life. We shall show that, in order to measure outcomes, it is necessary to systematically record information from the first presentation of the case, so as later to be able to demonstrate what change has been accomplished. We shall also demonstrate that this activity is part of a necessary ongoing audit activity for services, but that, since there is no certain knowledge of what outcomes could have been expected prior to the implementation of new service developments, it is necessary to include a control group recruited from previous services, in order to establish meaningful benchmarks or norms to which the outcomes of a new service should be compared and judged. We argue that this methodology, despite the use of such a control group constitutes audit rather than research, but should be still amenable to statistical analysis. In order to be meaningful, and since serious mental illness may well be chronic, it is necessary that outcome measures should be carried out regularly, after specified periods of time. We also argue for the use of appropriate rating scales, which measure both the number and the intensity of symptoms and for computer based notes in order to facilitate regular audit.