Drawing flowcharts can be time-consuming, but internal auditors can gain a wealth of information during and after preparing them. By following these suggestions the benefits will far exceed the costs.
A flowchart is a type of diagram that represents a workflow or process. It shows the two most common items in a flow: Processing steps (as boxes) and Decisions (as diamonds). The order, or sequence, of the various activities, is shown by arrows and they are used to design, analyze, document and manage processes. These flowcharts answer the question: What Happens?
A flowchart can also be cross-functional by dividing the diagram into swimming lanes. Each lane represents an individual or unit performing the activities within that lane. This approach allows internal auditors to identify responsibilities because it shows who performs an activity or makes a decision. These flowcharts answer two questions: What happens? and Who does it?
Flowcharts can also add a third dimension by showing the cycle times involved. This includes the amount of time the entire process takes from beginning to end, how much time each step takes (i.e. “the time in the boxes”), and the amount of time waiting or in transition between steps (i.e. “the time between the boxes”). By understanding the time element, internal auditors can better understand the speed, bottlenecks, and delays in the process. When all of the time “inside the boxes” is added, it represents the value-add time during the process since this time is spent processing transactions and performing activities. When all of the time “outside the boxes” is added, it generally represents the non-value-add time because it is the time spent waiting and transporting. These flowcharts answer three questions: What happens? Who does it?, and How long does it take?
This third dimension raises the question: How do I get the time information?
There are three approaches:
- The traditional stopwatch approach can be used to record start and stop times. While it is arguably easier to use a stopwatch in industrial environments, it can be used to obtain readings during process observations and walkthroughs in a service operation too.
- If the process uses document management software, there may be user and date/time stamps at each step of the process. That information can be downloaded and examined using data analytics to connect the flowchart with the various steps.
- Takt time is the rate at which the operation produces output. The formula calculates the average amount of time, or pace, of activities, and it can be used to determine the pace to keep a process flowing without backlogs. It provides average times for all transactions during a period of time, so per-transaction information would need to be obtained through other means. I will explain this method in more detail in a future blog post.
How to Draw an Effective Flowchart
- Define the process boundaries and identify the starting and ending points.
- Agree on standard flowchart symbols to use. It is important to agree on a standard as this can become a source of wasted time debating which symbols to use.
- Complete the big picture before filling in the details.
- Clearly define each step in the process. It is important to ask about non-traditional transactions, unusual pathways due to special circumstances, preferred customers, and other exceptions to the rule. The flowchart should be realistic, not only a reflection of what happens under ideal circumstances.
- Indicate who performs the activity or makes the decisions.
- Identify time lags and non-value-adding steps.
- Circulate the flowchart to others involved in the process to get their feedback.
Flowcharts don't work if they're inaccurate or if those providing the information are too far removed from the process itself. Team members should be true participants in the process and describe what really happens.
Getting Deeper Insights
If there are multiple pathways within the process (e.g. due to rule exceptions, rush-orders, preferred customers, favored vendors), showing on the flowchart the number and percentage of transactions that flow through each pathway can be eye-opening. Especially since in many cases management is unaware of these dynamics. Also, employees may know about the different pathways but are unaware of the numbers flowing variously. These alternate pathways often become risk-aggregators because they tend to be repositories of management override and policy exceptions.
Enquire about transactions that are returned. Sometimes transactions don’t flow smoothly from start to finish but are returned because they lack key information, contain errors, are missing attachments or supporting documentation. These as backflows. Find out what are the common reasons transactions are returned because eliminating them can improve the process significantly.
Flowcharts don't work if they're inaccurate or if those providing the information are too far removed from the process itself. Team members should be true participants in the process and describe what really happens. #audit Click to Tweet
Carefully compare the activities performed with the identity of the other participants in the process, and who reviews and approves transactions. This can indicate concerns about the segregation of duties. Other issues include over-burdening some individuals while others carry too light a load. This imbalance can cause errors and delays.
Review the flow of activities and the hand-offs that occur. Excessive handoffs can be problematic because with every exchange there is an increased risk of delays and things “falling through the cracks”.
Examine the time “inside the box” and the time “between the boxes”. Do any steps appear to take too long? This could indicate a lack of training, to much complexity, or that the individual is also responsible for other activities and the typical day is spent multi-tasking. Maybe a review of job responsibilities or priority-setting practices can help.
Ask about bottlenecks - where transactions sit for a long time waiting for the next step to be performed. Is this acceptable or the result of someone struggling to keep up? Is there a need to assign a back-up operator or decision-maker so transactions don’t sit in a queue until someone returns?
Flowcharts represent a great tool to understand processes. They can show the flow of hardcopy and electronic documents and information, the role the relevant stakeholders play in the process, and identify the responsibility for each step. Asking targeted questions and using a collaborative approach involving process owners will allow internal auditors to get more information from their flowcharts and provide value-adding recommendations for improvement.