Profitable Processes

Posted by accountingweb on Nov 10 2010 951 printer friendly

The pathway to greater profitability is to focus on improving process flow. It is the key to unlocking the cash register and increasing profits. There are thousands of processes in most organizations. This means lots of opportunities for increasing profits.

In economic times where people are afraid, take the emphasis away from cutting people and allow them to focus on process improvement. Get away from asking who to asking why. The key to drive out fear so that people are motivated to direct their effort and questions toward improving processes.

When this is the case you can begin the quest for better understanding of your processes. Here are some examples:

Why are these items sitting here?
Why do we produce more than the customer ordered?
How come it takes so long to change set ups?
By speeding up our set up times can we avoid investing capital in new equipment?
Where is the bottleneck in this process?
Why are these products being reworked?
Why is the travel distance in this process so long and how can we reduce it?
How can we reduce the number of times we handle items?
What is the delivery time and how can we reduce it?

This is just a sample of the types of questions that can be asked. Also, these same sorts of questions can be applied to processes such as order entry, purchasing, accounts payable, and accounts receivable. Now you have created a foundation for critical thinking and making improvements in cycle time and process flow.

The key to making improvements and increasing profitability is to constantly challenge perceived levels of certainty. Don’t assume that things and processes always have to be performed a certain way.

Go back and read my blog post on solving problems and applying the “5 Whys” and you’re on the way to making real progress and increasing profitability. You can also read more posts at www.northrupcpa.com/blog.

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Building Business Value

Lynn Northrup, CPA, CPIM - Lynn's focus is on building business value for both family-owned businesses and other CPAs. I also specialize in lean accounting, process improvement, internal control, and assessment of audit risk. Other accomplishments include publishing two books, development of self study programs for Bisk Education, and an Adjunct Professorship at Villanova University. My wife Jessica and I live in southwestern Colorado and we look forward to contributing to the AccountingWEB community.

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