Home >> Other Accounting Topics
Run Charts in Accounting
Overview of Run Charts
Run charts are used to display process performance over time, and are an effective way to visually spot trends and cycles in data. This is a high-level analysis, and must be followed up with a detailed review of the data to locate and correct underlying causes. Run charts can also be used as a feedback loop, to ensure that changes made to a process have resulted in improvements.
The typical run chart, shown below, itemizes events on the y axis and the time period over which the events occured on the x axis. As shown in the exhibit, it is also useful to include a line, running parallel to the x axis, showing the average for the events; anyone viewing the data can use it to determine the extent by which events have departed from the average. The example shows a run chart for the average number of days to obtain approval of supplier invoices, with a strong downward trend beginning in April, when the company begins the rollout of an electronic workflow management system for payable approvals.
When reviewing a run chart, be aware that there is some normal variation in the data, so always review the data over a sufficiently long period of time to determine the general min-max range within which the data normally falls. The main focus of attention should be on events that fall outside the normal range of data, and in particular those events which do so in a repetitive manner. If the run chart contains a large number of data points and at least eight consecutive events appear on one side or the other of the average, then it is likely that a unique underlying cause has influenced the process.
Example of Run Charts in Accounting
For example, the invoice creation process typically requires a few hours from the point of service or product delivery, but there are valid reasons for occasional delays in this process, such as a salesperson needing to create a cover letter to accompany an invoice, or (at the other extreme) an automatic invoice delivery using electronic data interchange. But what if the creation process is delayed by the hiring of a new warehouse manager who is not fully conversant with the process of sending shipment information to the billing staff for conversion into an invoice? If so, the run chart shown below reveals that the delay in invoice creation suddenly jumps from an average of three business hours to 13 business hours (with an attendant delay of cash flow, which highlights the importance of this issue). The run chart makes a clear visual case for further investigation into the invoicing delay, which should ultimately result in the rapid re-education of the new warehouse manager!
Where else can the run chart be used in the accounting process? It works best for the analysis of high-volume transactions, so consider using it for process analysis in the billing, collections, inventory, payables, and payroll areas.
Podcast
A discussion about run charts is available on Episode 32 of the Accounting Best Practices podcast. Listen Now.
Related Topics
Best practices duplication
Check sheets in accounting
Keystroke error reduction
Process centering
Production cells in accounting
Streamline the accounting work flow
Value stream mapping