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CATEGORIES OF BUSINESS PROCESSES

March 29, 2019

 
There are three categories of Business Processes

 

1) Operational Processes

2) Supporting Processes

3) Management Processes

 

Let us look into each of these processes in detail

 

CATEGORIES OF BUSINESS PROCESSES - OPERATIONAL PROCESSES

 

  • All those processes directly involved in generating revenue for the business are called operational processes.
     

  • For example: In a Furniture Manufacturing Company, the processes like procurement, production and sale of dining tables, production and sale of cots, production and sale of study tables are all operational processes.
     

  • Let us look at an example of how a sale process is automated using these information systems. The sale process comes under the category "Operational Processes".
     

  • The sale process in the business parlance is called Order to Cash Cycle. This typically means, the entire process from receiving the customer's order to dispatching the goods on time to collecting cash will be plotted and frozen for companies to follow. The information system which the company uses will also be designed or programmed according to these standardized processes.
     

  • Steps in Order to Cash Cycle: An Order to Cash is a complete process in itself which has many sub-processes as listed below.

Step 1 -Receipt of Customer Order - Receiving customer's order mentioning the type of product, date of expected delivery, quantity, quality etc.

 

Step 2 Order fulfilment In this step, the company ensures the customer's requirement on the type of product, quantity, quality and expected date of delivery is fulfilled without any hassle.

 

Step 3 Delivery Note: This is an important step, as this step is the proof of delivery made to the customer according to his specifications. The delivery note is usually signed by the customer and returned to the seller

 

Step 4 Invoicing: After delivering the goods and getting the delivery note signed by the customer, the company generates the invoice/ bill as proof of sale made.

 

Step 5 Collections: The next step is to collection of money from the customer 

 

Step 6 Accounting: The next step is to account the amount collected from the customer in the books of the company. 

 

[ Note: The accounting mentioned above is the recording of cash collection only as the sale would have been recorded as per the revenue recognition]

 

 

CATEGORIES OF BUSINESS PROCESSES - SUPPORT PROCESSES/ SECONDARY PROCESSES

 

Supporting processes are those which are not directly involved in revenue generation, but helps or supports the operational processes.

For Example: If you take the accounting process, it does not generate revenue directly for a furniture manufacturing company, but it supports the revenue by performing the accounting function for procurement and sale of items of furnitures.

Hence,if you are employed in a furniture manufacturing company like say Nilkamal Limited and recruited into the finance department, what your department will be doing is the support function to operational functions or primary functions.

 

Examples of Support Processes include HR Process, Accounting, Information Technology etc.

 

Now let us try to understand how the HR process work

 

Step 1: Recruitment and Staffing: This sub-process is concerned with the recruitment of employees for various jobs and fitting them in the right job according to their qualification and experience.

 

Step 2: Goal Setting: Next, to make the employee perform, every employee, right from a junior executive(fresher) till managers in higher levels of management, is given a goal to accomplish for every year and his performance is evaluated based on the accomplishment of the goal.

 

Step 3: Training and Development: Next,HR department of any company is also responsible for continuously training an employee in various areas and ensures his overall skill set is developed which will make him contribute to the company's overall growth. For example, if you are recruited into a company in the Internal Audit Department, you will be trained in areas like advanced internal auditing concepts and practices adopted by the company, Excel, ERP applications etc.

 

Step 4: Compensation and Benefits: The HR department is the one responsible to fix your compensation and take care of the benefits you take home like bonuses, allowances etc.

 

Step 5: Performance Management: Your performance as an employee is managed overall by the HR department and it is the responsibility of the HR department to ensure that your performance is in line with the organizational objectives.

 

Step 6: Career Development: HR department then becomes responsible for your career development like your training, promotion, job transfers etc.

 

Step 7: Leadership Development:  They will also be responsible for developing leadership qualities in managers on various aspects like team management, employee management, time management etc.

 

CATEGORIES OF BUSINESS PROCESSES - MANAGEMENT PROCESSES

 

There are also separate set of processes called Management Processes. These set of processes are mainly concerned with management related activities like internal communications, governance, budgeting, capacity management etc.

 

Let us take the example of the Budgeting Process, which is usually done by the Top/ Middle-level managers and how this entire process flows and is automated by the applications or the systems.

 

Budgets take into account the overall objective of the company and this overall objective is then broken down into smaller achievable chunks to be carried out in different points of time.

 

Step 1: Vision: Vision is the main goal of the company. Example the next immediate goal of the company could be, " To become a market leader in India in "Furniture Manufacturing Business" could be a vision of the company.

 

Step 2: Strategic Plan: Next comes the strategic plans or steps to be taken by the company to achieve its objective of becoming a market leader in India.

 

Step 3: Business Goals: The larger vision or the goal is further broken down into smaller achievable goals for next few years to achieve the overall objective.

 

Step 4: Revenue Projections: Based on the goals, revenues are projected. The revenue projections have to be systematically calculated and made by the management.

 

Step 5: Cost Projections: To achieve the revenue projected or aimed for, costs to be incurred by the company are also projected.

 

Step 6: Profit Projections: Profit projections are based on the Revenue and Cost Projections, Profit Projections are made. The percentage of profits which are 

 

Step 7: Board Approval: These budgets then go through an approval process to ensure that the budget is realistic and achievable. Managers and the Board of Directors get into a series of discussions to understand the action plans by the managers to achieve the goals and then approves the budget.

 

Step 8: Board Review: The approved budgets are then reviewed periodically to ensure that the company is on track towards the achievement of its objectives and if required, these budgets are then revised.

 

This is one example of the budgeting process which is a part of various management processes. This process is automated by the applications.

 

For any further assistance or questions on the topic drop us an email to therankholder@gmail.com.

 

Download Exam Oriented Short Revision Notes on Categories of Business Process

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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