Process Characteristics
Business Process Management Uses Process Characteristics
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James Brimson in his book "The Handbook of Process-based Accounting, Leveraging Processes to Predict Results published by American Institute of Certified Public Accountants, defines process characteristics as:

  • "Flow: sequence of processes and activities of a process
  • Resource Consumption: average amount of resources consumed in producing one unit of output
  • Cycle Time: time taken by process to transform an input in an output. Cycle time is directly related to process velocity, about of process to create free cash flow
  • Effectiveness: How well a process meets its cost and performance targets
  • Storehouse of Value: value inventory created for future operations
  • Process Value Creation: gauged by excess of life cycle revenue over cost"

Flow simply means the order of operations or activities within a process. A company may close sub ledgers  before reversing their accruals from the previous month.

Resource Consumption is materials, wages, energy, information consumed in producing one unit of output.

Cycle Time is total time taken to transform one unit of input into one unit of output. This is the total cycle time and not just the process time.  For example, it may only take 2 minutes to actually approve an expense report and have the computer automatically generate payment. However, it may take a week to get someone to look at your expense report. In this example, the process time would be 2 minutes, but the Cycle time would be one week. Your internal customer is concerned with the cycle time. You may be concerned with the process time as one way to reduce the cycle time.

Effectiveness: how well does the process meet its targets for cost, time, and quality.  A five star restaurant may have higher quality meat than a fast food restaurant. So the performance targets for the 2 different types of restaurants will be different. However, both types of restaurants may have a similar target of 99% customer satisfaction.

Storehouse of Value: every process either creates or destroys value. An accounts payable systems that misses vendors discounts due to late processing or that does not catch double billings would destroy value. Meanwhile an accounts payable process that catches double billings and takes all appropriate discounts would create value for the organization.

Likewise two improvement processes may cost the same. However, one process may increase revenue more or reduce expenses more or increase customer satisfaction more and thus increase revenue. Just looking at cost does not provide the total picture of value.

Process Value Creation: process value creation must be measured over its life cycle. Process value creation is accomplished a number of ways:

  • "Achieving targeted outcome...
  • Rapidly creating positive cash flow...
  • Minimizing process variation...
  • Rightsizing...
  • Matching process capacity to customer requirements."

Call John Antos, Jim Brimson or Pat Dowdle at 972-980-7407 to find out more about Process Management.

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