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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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