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Best Practice – part 7

9/15/2011

13. Workflow used for relaying / tracking queries
Workflow tools track activity within the process to ensure:
· The status of actions is known
· Blockages and causes of problems within the process can be identified.
· Who is doing what is known

14. Problem resolution owned at root cause
People do not pass the problem to someone else. They accept responsibility for doing their part correctly. If they get something wrong they fix it and try to ensure it does not happen again

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Best Practice – part 6

9/1/2011

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11. Customer / vendor terms defined in contract & system driven
Any contract / trading terms used are held within the system and drive consequential actions (eg: when a vendor is paid, whether a customer gets credit or when / how they are billed).

12. Imaging used for archiving / retrieval / workflow of documents
Paper is removed from the process by imaging it. People do not have to rummage around in in-trays, boxes or archive rooms to find pieces of paper. If there is a query then a copy of a document can be emailed or workflowed.

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Best Practice – part 5

8/25/2011

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9. EDI / ERS / Electronic trading with customers / vendors (where possible)
If you are able to trade electronically with someone then you are, in what ever manner is appropriate. It could be full B2B integration or it may just be receiving a spreadsheet. Some may call ERS: self-billing or buyer-generated-invoices.

10. Minimal number of vendors / customers / stock / materials / etc. applicable to process
The master data files are regularly reviewed to ensure that only those master files that are used are active in the system. There are minimal duplicates, unless for a specific reason, and there are controls over who can create / maintain master files.

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Best Practice – part 4

8/11/2011

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7. Online verification, approval, inquiry
If someone wants to find something out, or needs to approve or verify something, it can be done online with their system access as proof of their authority. People do not have to ask someone else to query the system and a piece of paper is not signed when they could have approved it online.

8. One main process
There is one main process which is adhered to for the majority of the volume. Any other processes are used because they are valid alternatives where a conscious decision was made to process the volume in this way (people are not just allowed to do what they want). For example for Accounts Payable most of the invoices may require a purchase order, but there may also be a purchasing card for low value transactions, credit cards for travel / entertainment, and electronic invoices for some vendors. All are process variations but are for acceptable reasons.

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Best Practice – part 3

7/28/2011

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5. Data available electronically
Once input into the system all required data can be viewed in the system, by query or report, by the people who need to see it.

6. Data fields pre-populated
Where an activity is a consequence of a previous activity common data is pre-populated (ie: it does not have to be re-entered). For example: the data in a sales order is pre-populated for use in the invoice.

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Best Practice – part 2

7/28/2011

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3. Integrated software
In the past experts recommended one system. Now people prefer “best of breed”. Either way is acceptable as long as the systems are integrated so that data does not have to be re-entered. Ideally the user can see through one system into the other without having to log out and in to something else.

4. Data captured (entered) at source
Simply put, people are not filling in pieces of paper to pass to someone else to input into the system when they could easily have done it themselves eliminating the need for the form

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Best Practice – part 1

7/13/2011

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1. There is a process owner
A person in the organisation who takes the process view. They own the process no matter whose area it crosses and are tasked with ensuring what is done is in the best interest of the organisation (not one particular person or part).

2. One shared services style function
Shared services is a methodology for structuring and running processes. Its three main principles are:

All processes are considered key to the business and are taken seriously
People performing the process focus on quality and cost efficiency
There is a focus on continuous improvement

This does not mean you have to have a shared services centre. Just that you try to follow the three main principles.

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What to consider in assessing the quality of a process

7/3/2011

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You should consider:

Is it streamlined
Are there quick turnaround times
How high is the accuracy
Are there minimal queries
Is it right first time
Are people doing what you would expect them to do

This can be done by assessing how the process compares to Best Practice and what we think are the 6 key quality measures.

Be careful with the term “best practice”. In the end it is “what is best for you” not the person down the road. They will have different circumstances, influences and goals to you. But best practice can be used as a guide to the sorts of things you would expect a reasonable person to do if they wanted a quality process.

The next 7 blog entries will provide a list of criteria for Best Practice. They represent what we believe is a generic process best practice. Not all of the criteria are applicable for every process, but for the majority they ring true.

The aim is to create a list which reflects acceptable best practice for the process you are reviewing, so feel free to add or remove criteria from the list to suit your process.

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Key cost metrics for a process

6/21/2011

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The two key metrics for measuring the cost of a process are:

Volume drivers processed per FTE per annum
The more a person can process the better. If you can increase this measure your cost performance must be improving.

Process cost per volume driver
The lower the cost per item a person processes the better. If you can reduce this measure your cost performance must be improving.

The Volume Driver is the main item that flows through the process. For example:
Accounts Payable = Vendor invoices
Accounts Receivable = Customer Receipts
Credit Management = Customer Accounts
Purchasing = Purchase Orders
Payroll = Employee Pays
Call Centre = Phone Calls
Inwards Goods = Goods Receipts

The above is not an exhaustive list, they are just examples

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The fully loaded cost of an FTE = Direct Cost + Indirect Cost

6/15/2011

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It is important to understand the effect of cost choices because if you choose to rent premises in the heart of the city, then you will have a higher “fully loaded” FTE cost than someone who rents premises in the suburbs. When you compare your cost performance against others you need to understand this. You could process the same volume per FTE as someone else but at a higher cost because of your organisations cost choices.

An easy way to estimate an FTE’s “fully loaded” cost
The “fully loaded” cost is most likely in the range of 2 to 3 times the salary / wage cost of the FTE

eg: if the FTE is paid $50,000 pa the fully loaded cost of that person will probably be in the range of $100,000 to $150,000 pa.

You can test this by taking your:

Total organisation annual budget
Total organisation annual salary / wage budget
Divide both by the number of FTEs in the organisation

Compare the two results and you will get an idea as to what your organisations “fully loaded” cost multiple is.

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