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FREQUENTLY ASKED QUESTIONS
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QUESTIONS FROM SEMINARS AND WORKSHOPS
Because my Cash Flow over Time (CF/T) system is unlike most gainsharing systems, I have added this FAQ page. This page will change from time to time to cover more questions and answers. Your questions are more than welcome. E-Mail bbellofatto@msn.com.
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Q
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What's the difference between CF/T and other gainsharing systems?
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A
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CF/T is the only gainsharing system that is truly adapted to creating a LEAN organization. Most gainsharing systems focus on labor savings only. CF/T includes the entire organization, workers, supervisors, and managers are on the same system. The focus in on improving the process lead time to increase turns, improve cash flow, and build profits.
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Can you explain what you mean by the "Closed Loop" system?
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No matter what type of business your in, the process starts with pumping invested capital into the process of producing goods or services and it dosen't end until you deposit the money back into your bank account for reinvestment. "Cash > Product or Service > back to Cash" That's the Cosed Loop system.
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Q.
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Why do you put managers, supervisors, and workers on the same system?
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A.
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Because any organization has to be good at many things in order to be successful. You can have high productivity and still not be making a profit. One productive activity can be nullified by another activity. You can have high labor productivity but have the benefits offset by poor customer service, or poor planing, or missmanaged accounts receivables. An organization is a whole entiety. It's not the sum of its parts. So if you want to measure the collective results, you have be "all inclusive". The best way to do this is to measure the productivity of capital and not the productivity of goods or services.
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Q.
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So CF/T focuses on Return on Investment?
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A.
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An adequate R.O.I. is what every organization wants, but R.O.I. is the results of a lot of activities. CF/T is proactive. CF/T focuses on the velocity of capital throught the system and holding down costs - velocity times profit percentange equalls R.O.I. In manufacturing for example, the use of Kanban to improve the flow of goods through the system, the use of Total Quality Management for constant improvement, and the reduction of waste all improve the flow through the system. On the other hand, excessive inventories or slow paying customers, which increases accounts receivables, slow the process down.
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Q.
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Would you explain why you use cash flow over time as a measure of organizational productivity?
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A.
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Managing cash flow is the most critical part of running any business. It's the life blood of every business. Cash flow pays labor, materials, overhead, interest on loans, "taxes", and stockholder/owner dividens. So it makes sense, the amount of cash flow per hour you produce is more important than the amount of goods or services you produce. Much of the goods produced in the country never reach their intended customer. There is such a thing as "bad debts" also. RULE ONE of the CF/T System: "There is no inovaton, creativity, or productivity until the customer pays for it".
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Q.
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Would you explain RULE TWO of the CF/T System: "If it's not moving, it's not making money".
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A.
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Those companies that are involved in the concept of developing a "lean" organization understand this best. A good example is having excessive inventories. They eat up cash flow or invested capital. Yet the inventories are worthless until they get back into the process. Economists call them "sunk costs". The same is true with excessive accounts receivables.
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Q.
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You focus CF/T on the economics of running a business instead of the financial side of running a busines.
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Yes. Economics: "pertaining to the production, development, and management of material wealth". How fast this takes place (velocity)is the key to ROI. Financial statements tell you how well you performed as an economist.
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