Suite 1, 25 Westerton Road, Glasgow, G68 0FF


August 15, 2011

Making a Start with Throughput Accounting

Moving to Throughput Accounting from a “traditional” accounting set-up involves moving from a focus on economies of scale to one on economies of flow. While we should not be prescriptive, I suggest that seven elements need to be addressed when moving to the Throughput Accounting economies of flow approach:


  1. A precisely defined Value Stream with a clear customer purpose and dedicated resources and people
  2. Cost centres and data collection structure aligned with the Value Stream(s) for easy and timely reporting
  3. A Value Stream map with each activity/ work centre showing flow time, cycle time, wait time, capacity, and other key data items
  4. An understanding of flow in the Value Stream(s) including variations in demand, and the level of failure demand and rework
  5. Weekly reporting of Value Stream measures of flow, quality, and customer service/ delivery; with daily measures at work centres
  6. An understanding of the impact of corporate practices and policies on flow – sales incentives, reward policies, KPIs, management priorities, period-end routines, and so on
  7. An improvement team empowered to make changes


Working on these seven areas will help establish a clear structure for Throughput Accounting and give you a firm grounding for improvement. Your improvement team should have three initial tasks:

  • improve the bottleneck (constraint) stage;
  • ensure that no non-value-added step delays a value-adding step;
  • develop improvement plans for  the end-to-end Value Stream



Good luck.