Business Flows Release 3: Introducing Value Flow

From Value Creation to Finance & Controlling - Aligning the separated views on your business

- Ikemefuna Allen

The situation

When talking to professionals from purchasing, production planning, and sales & distribution, they often seem not aware how their business operations impact accounting. By the same token, accounting departments are repeatedly left in the dark about business operations during process design phases of major transformation initiatives. This misalignment can be very costly, causing gaps from process design through to business rule definition, and Key Performance Indicator (KPI) interpretation.

Business processes are essential building blocks for organisational change and change can only be brought about when the stakeholders share a common goal; aligning on what needs to be done, how it is to be done, and what the implications are, once the work is done.

It is widely believed that thinking about business processes from an End to End (E2E) perspective fosters operational excellence since the key process flows, business rules, business roles and expected business outcomes are considered at all levels within the organisation. But Accounting too has its share of rules, legal requirements, roles, and expected outcomes, and often depend on input from upstream processes to ensure optimal service delivery. Keeping this in mind, one clearly sees the potential risks associated with a misalignment between business operations and accounting.

The solution approach

To foster holistic organisational transformation, it is essential that all business areas are in sync at the earliest stage of process design. The Value Flow approach facilitates the marriage between value creating processes and their Finance & Controlling requirements. This shall be demonstrated in the following examples.

1. Perform goods issue for sales from stock

Based on a customer order, goods are issued from stock, triggering a delivery to the customer. When this occurs, the relevant accounting entries are made namely, a posting to Cost of Goods Sold (COGS) and posting of the inventory reduction. The illustrated BPMN model below visualises this business transaction and the corresponding accounting impacts. In this model, the accounting postings are presented in a separate pool.

2. Create Customer Invoice

Once goods have been issued and a delivery is triggered, we expect the customer to be billed accordingly. The creation of a customer invoice will result in the recording of a receivable on the customer’s account, and the posting of the revenue which is derived from the business transaction as shown below.

3. Cross-company Business

Though the above presented examples may seem simplistic, Value Flow visualisation becomes more complex when considering business transactions among companies from one corporate group. A cross-company sales scenario typically involves a customer, the company selling to the customer (selling entity), and at least one other company belonging to the same corporate group as the seller (delivering entity). Showing the Value Flow for the transfer of ownership of goods, and the invoice creation can be equally challenging and enlightening when considering aspects of materials transfer, cross-company billing, commission agreements, and accounting requirements for balance sheet and P&L account consolidation. The illustrated BPMN model visualises the transfer of ownership of goods during a cross-company business transaction. 

4. Product Costing

When calculating the product cost for manufactured goods, it is necessary to keep detailed track of all incurring direct and indirect costs. To do so, controlling functions must ensure that related costs are recorded and allocated accordingly within the relevant accounting period. Value Flow can be used to visualise the material and time consumption related to manufacturing processes. This provides useful information when aligning the policies and computation method for product costing. The BPMN model shows the accounting impacts when materials are used in the production process. 

The way forward

Value Flow representation enriches process documentation by establishing cross references between key Value Flow topics within a business such as COGS and inventory postings, and the various instances and related E2E scenarios. These should be defined at the same point in time as process design with an early involvement of accounting departments. Value Flow therefore offers a framework to ensure alignment between Operations, and Financial and Managerial Accounting in business transformation initiatives. 

In the next release of Business Flows, we will provide reference models with Value Flow representation for all core business processes. These can be used as a template to refine according to the scope and concepts of your business transformation initiative. 

For inquiries on the concept and how to establish value flows in your environment please feel free to contact me.  

Webinar: Business Flows - Best Practice Referenzmodell in Signavio am 31.01.2017

Webinar Business Flows — Best Practice Referenzmodell in Signavio

Cloud basierte BPM Tools wie Signavio bieten den Vorteil, dass Unternehmen sich schnell in BPM Initiativen 'stürzen' können, ohne sich in Bezug auf die Selektion eines Tools und die Planung einer BPM Roadmap zur Berechnung des ROI langfristig Gedanken machen zu müssen.

Bei der Projektinitiierung, spätestens aber in der Design-/Modellierungsphase stehen dann viele Kunden vor folgenden Fragestellungen: 

  • Wie strukturiere ich meine Prozesse am besten?  

  • Wie modelliere ich am besten?  

  • Wie komme ich schnell zu guten Prozessmodellen?

Damit der gewonnene Schwung nicht verloren geht, bietet sich die Verwendung des Business Flows Referenzmodells an.

In Business Flows fließt jahrelange Projekterfahrung ein und es bietet folgende Kerneigenschaften:

  • Industrie Best Practice und SAP konforme Prozessmodelle

  • Granularität und Konventionen der BPMN Modelle passend für große Business Transformationen und Standardisierungsinitiativen

  • Architektur und Ebenenkonzept zur klaren Strukturierung des Scopes und Etablierung einer End-to-end Prozessorganisation

Der Inhalt von Business Flows kann direkt in Signavio zur Verfügung gestellt werden. Damit müssen Prozessinitiativen zukünftig nicht auf der grünen Wiese beginnen und umständlich alles neu modellieren, sie können vielmehr effizient Modelle auswählen, ergänzen und justieren. Mit der Sicherheit, ein valides und nachhaltiges Ergebnis zu erzeugen.

In unserem kostenlosen 45-minütigem Webinar in Kooperation mit Signavio am Dienstag, 31. Januar um 15.00 MEZ, wird das Referenzmodell Business Flows vorgestellt und anhand von konkreten Anwendungsfällen dargestellt, wie Sie es erfolgreich im Rahmen Ihrer Prozessinitiative oder Ihres Transformationsprojektes einsetzen können. 

 

 

On-demand best practice processes - Introducing Business Flows

bpExperts therefore proudly presents Business Flows! The first on-demand business process reference content accessible for all.

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