Run charts in accounting

Overview of Run Charts

A run chart is a tool used to view the results generated by a process over a designated period of time. The chart is useful for noting trends in batches of data. A run chart is typically used to locate an indication of a problem, after which more detailed review work must be completed to determine the underlying problem causing the indicated change. A run chart can also be used to track the outcome of a process that results from a deliberate change to the process.

An example of a run chart is shown below. The chart notes all events being recorded on the y axis, and the time period covered on the x axis. The sample chart also includes an average outcome line, which is useful for comparison to actual results. The sample chart is intended to show how long it takes to obtain an approval for an invoice submitted by a supplier. The chart shows a rapid decline in the approval time part-way through the month, which reveals the result of a workflow management installation.

An issue to be aware of when reviewing a completed run chart is that there will inevitably be some natural variation in the data from period to period. This means that you must aggregate the data over a sufficiently long period to see if the natural variations actually contain a discernible trend. If the data consistently runs outside of the normal range of data variations, then further investigation is indicated.

Example of Run Charts in Accounting

The run chart can be used to great effect in the accounting area. An example of one area of usage is the time required to create customer invoices, which has an impact on the time required to collect cash from customers. Ideally, the process should be concluded within a few hours of the shipment of goods to a customer. The following run chart reveals a startling jump in the invoice creation time that is well outside the bounds of the normal range of variability. A massive change in the indicated amount should be investigated at once. In this example, the delay is caused by the hiring of a new warehouse manager, who was not aware that shipping notifications had to be sent to the billing clerk at once.

Other places in which the run chart concept can be used in the accounting area include accounts payable, billing, inventory transactions, receivable collections, and payroll. In all of these cases, the transaction volumes are quite high, which translate well into a run chart.