Follow the money.

• Author: Arthur, Jay

Greed or criminal intent are not the sole reasons for lost revenue. Careless, neglectful, and indifferent performance also contribute to revenue losses.

Every top cop show on television has one cardinal rule for solving the crime: follow the money. The same is true in business. In business, crimes that siphon cash from cash flow are committed every day. They threaten profitability and cause customer dissatisfaction. These aren't crimes of passion or greed, but crimes of neglect. These aren't criminal acts of employees, but crimes of performance. The best way to solve these "crimes" is to follow the money.

The Crime Against Cash Flow

Every day, businesses lose cash to crimes of all sorts resulting from a plethora of performance problems, such as the following:

* Credits to customers for mistakes and errors in the product or service

* Adjustments for mistakes, errors and delays

* Warranty costs and returns

* Excessive inventory costs (raw and finished goods)

* Rework of products and services to meet specifications and expectations

* Costs of scrap materials and products

In a typical profitable company, these crimes can cost a third of total revenues. Truth be told, most companies are robbing themselves of huge profits because their systems and processes let these crimes take place. Some acts are misdemeanors and some are felonies, but together, they can rob a company blind.

The Criminals

Three common criminals are involved in this kind of robbery. They aren't people. People make mistakes, but usually they do so because the process and systems allow or force them to make mistakes. To help companies solve this kind of crime, one can always turn to the usual suspects:

* Unnecessary delays, which increase turnaround time, cause missed commitments, and frustrate customers

* Preventable defects in the product or service that result in credits, adjustments, returns, and rework

* Preventable deviations in the product or service that result in unnecessary rework and scrap costs that devour profits

Unnecessary Delays

In any business, people are busy, and the product or service can sit idle for hours or days waiting on the next step in its creation or delivery. Most business owners find it hard to believe, but employees only work on the product or service for three minutes out of every hour. Delay accounts for the other 57 minutes. One or two delays between steps account for more than half of the total delay time.

Seemingly "normal" delays can have a...