Managing Cash Flow

180 Analyzing Non-Value-Added Functions
PEOPLE
1. Who is involved? And why?
• Number of people
• Number of positions
• How organized and managed
• Current personnel resource demands
2. Are all personnel needed?
• Reasons for involvement
• What they are doing
• Value-added or non-value-added
• Vital operation or task
• Special expertise
3. Who has responsibility for outcomes?
• Hierarchical pyramid: power and control
• Management oriented: review and redo
• Employee self-motivated, disciplined behavior
• Delegation of authority to lowest operational levels
• Empire building: work continues – reason no longer valid
PROCEDURES
1. Why is the task performed? (e.g., It has always been done this way)
2. Is it necessary or unnecessary? (e.g., That is the way we do it)
3. Does it add value to customer? (internal versus external viewpoint)
4. Is there unnecessary bureaucracy? (e.g., unwieldy hierarchy)
5. Are there ineffective, inefficient, or redundant procedures?
6. What do people do, and why do they do it? (foundation for internal
improvements)
7. What are the bundles or groups of value-added and non-value-added procedures
and activities?
Exhibit 6.1
Cash Management Study Questions
• Industry. Specific manufacturing, retailing, banking, and so on
• Business cycle. Based on the concept of closed loop activities such as:
• Sales cycle. Sales order—shipping—invoicing—accounts receivable—
collections
• Purchase cycle. Purchase requisition—purchasing—receiving—vendor
invoicing—accounts payable—cash disbursements
• Payroll/Labor distribution cycle. Time and job verification—data
entry—payroll/labor distribution processing—pay distribution—
record keeping
• General ledger/financial statement cycle. Subsystem data collection—
journal entries—general ledger posting—financial reporting