Process Velocity
Business Process Management Requires Understanding Process Velocity
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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, says:

  • "Process velocity measures the speed (time) of the process. The fast the pace, the greater the value created. Improving process velocity creates value for the following reasons:
    • great number of outputs can be completed during any time period
    • less working capital is tied up in financing a process
    • revenue is more quickly turned into cash
    • Market momentum (speed to market) triggers a revenue stream for company that makes it to market first.
    • Lower material and service costs
    • nimble management team that can adapt strategy and management practices to a changing environment will create great value than management team slow to act. Failure to recognize when to deploy a new technology will devastate value.
    • product or service is delivered to customers when they need them....important to strong customer relationships
    • R&D get new products and processes quickly to market"

The faster the process the faster the process converts cash outflow to perform the process to cash inflow. Remember the time value of money concept says money received today is better than money received in the future.  Lets look at some examples. Faster a company can do the following processes, the faster it creates cash flow

  • research and develop new products or services
  • prospect, present and close sales
  • manufacture product or produce service
  • arrange loans and equity financing
  • market products and services to create sales leads
  • hire critical employees
  • create new web page capabilities
  • improve search engine marketing

Some processes have much greater urgency for increasing their velocity than other processes. For example, it is important to file quarterly reports for public companies and for tax purposes on a timely bases. Less time spent on these activities while still meeting performance targets will results in less cost. However, these particular process although important are not necessary to the success of the organization like new product development process would be.

Find out how to improve the process velocity of your processes.

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

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