Throughput Economics to control the true variables of Economic and Financial Performance
Throughput Economics. The Right Levers for the CFO
Three Levers for the CFO to Control the Entire System
FROM DATA TO INFORMATION
In a race to produce more and more management information, WeeonD pursues the “subversive” approach to help Organizations and their managers at making good business decisions leveraging Throughput Economics, a management control and performance management framework that allows decision makers to focus on few but valuable information and to align to the same goal.
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Throughput: the amount of money the organisation generates through sales.
The measure we want to maximize
Inventory: the money the organisation spends to buy the things to be transformed into throughput.
It's Throughput suspended in the System
Operating Expenses: the amount of money spent to convert inventory into Throughput.
The energy moving the machine
Why Those Three Measures?
If we agree that The Goal of a profit organisation is to make more money now and in the future, then the CFO needs a measurement approach to evaluate the global impact of local business events, decisions and behavior and the right levers to control them.
Simple but not simplistic
Throughput Economics is more adherent to reality and is also simple to be implemented and executed. It saves controlling departments from overarching cost allocations enabling more frequent control than traditional cost accounting which requires much longer closing cycles.
Global & Systemic Focus
Three measures that are correlated to the real phenomena happening in any organisation. Every decision is evaluated and controlled in terms of its impact on throughput, inventory and operating expenses
Harmonic and Coherent
A performance system designed to reduce departmental conflicts and ambiguity, as everyone is measured against global results and not on departmental local optima
Aligned to competitive priorities
Shifting the focus from efficiency to money velocity, it strives management to quality at source, speed, agility and responsiveness and to optimize inventory for a faster cash-to-cash cycle time
Making a quantum Leap in Decisions
The simplicity of Throughput Economics makes it the perfect approach for Business Simulation useful for decisions making and scenario analysis
Is it difficult to implement?
Technically, implementing Throughput Economics in the ERP and Accounting System is extremely simple. What is less simple is breaking some mental models consolidated by years of habit of cost accounting. For that reason we have developed a specific coaching program to assist you squeezing any drop of value from it
Flow Dynamic
Unlike cost accounting, which is based on static assumptions of capacity utilisation, throughput accounting capture organisation's dynamics and takes into account the different demand-related resource utilisation profiles
Simplicity again
Again, the avoidance of complex cost allocations, makes it perfect for frequent reforecasting or even single decision impact evaluation. Moreover, It simplify the language and thus the communication between Finance, Sales and Operations.
Designed for competitive edge
It focused management attention on speed and on the exploitation of constraints. Used properly it reveals opportunities for different and new commercial strategies that are not revealed by traditional cost-accounting-based evaluation methods