What is Process Value Analysis?

Process value analysis is a systematic approach to identify, analyse and improve the value of specific processes within an organisation.

Process Value Analysis’s (PVA’s) purpose is to cut back the number of redundant processes and prices within the value chain needed to deliver honest service whereas maintaining customer satisfaction. If an activity doesn’t give value to the process, the analysis team appears for tactics to eliminate it. A close process value analysis can facilitate an organization to cut expenses whereas also decreasing the method’s time.

The primary goal of the process-value analysis is to assess the internal process and remove any extra steps. This could aid the company organization in cutting costs associated with internal operations. Due to lower expenses for the business organization, the process-value analysis results in higher customer satisfaction.

Process Value Analysis

Process value analysis (PVA) is a technique that managers use to identify and link all the activities involved in the value chain. It analyses business processes by relating activities to the events that prompt those activities and the resources they consume. Process Value Analysis is fundamental to activity-based responsibility accounting.

Process value analysis can help you evaluate any process—business, financial, customer service, etc. This article will focus on explaining the basic principles and concepts for process value analysis. PVA forces managers to look critically at all phases of their operations. Managers who use ABM find it an efficient way of reducing non-value-adding activities and their costs.

Process Value Analysis (PVA) improves cost traceability and results in significantly more accurate product costs, improving management decisions and increasing profitability. By using PVA to identify nonvalue-adding activities, companies can reduce their costs and redirect their resources to value-adding activities.

For example. PVA has enabled companies like Westinghouse Electric, Pepsi-Cola North America, and Land O’Lakes to reduce the processing costs of purchasing and accounts payable.

After identifying the nonvalue-adding activities involved in small-dollar purchases (e.g.. recording and paying small bills, setting up accounts, and establishing credit with seldom-used suppliers) and their costs, managers of these companies decided to stop performing such activities internally.

Instead, they chose the less expensive alternative of using a particular credit card known as a procurement (or purchasing) card from Visa, Master Card, or American Express to handle large volumes of small-dollar purchases.

Importance of process value analysis in management accounting

Process value analysis helps organisations evaluate their processes, identify areas for improvement, and make informed decisions. The process of value analysis helps break down a process into its component parts and analyze each step to determine if improvements can be made that will increase efficiency and reduce costs. By understanding how each part of the process works together to achieve the goal, managers can develop strategies that optimize performance and improve operations. The focus of process value analysis is on the process itself, not the results.

Conclusion

Process Value Analysis (PVA) is a process to help improve business processes by identifying opportunities to automate, standardise and transform business processes, to improve operational efficiency. The method of this process is by examining the data from the real world and using this data to drive the design of improved processes. It is therefore all about the business processes and how they operate within the organization.