Business Rules: How They Work & How to Use Them

Business Rules: How They Work & How to Use Them

Key takeaways

  • Business rules are an integral part of process centric workflows.
  • Business rules are a set of actions (alerts, tasks, and field updates) that are executed when certain specified conditions are met. 
  • Business rules define how business processes are to be performed under specific conditions. 
  • In layman terms, business rules are laws that streamline business operations. 
  • Rule-based systems can be great for ensuring that everyone collaborates effectively and progresses towards a common organizational goal.
  • Business rules are important because they help organizations to make quick decisions quickly and efficiently, with complete operational clarity. 
  • A no code workflow automation platform like Cflow includes a sophisticated rules engine that provides in-depth customization features based on multiple conditions, operators, and operands.

What are Business Rules?

Business rules are the policies, practices, or guidelines that your business uses to conduct business and determine its actions. They help establish how your company will operate, how you will respond to different situations, and what your customers can expect from you.

Most businesses act upon agreed relationships and specific guidelines in a more informal or verbal manner. Business rules control business activities and processes by integrating the required conditional logic into an organizational workflow. Business rules management systems (BRMS) implement business rules. Rule-based systems help organizations make the right decisions quickly and effectively, without causing any confusion among employees. Read further to understand business rules in detail, types of business rules, and examples of business rules. 

Table of Contents

Business rules can ensure that your company follows the law and regulations set forth by your industry. They can also help you determine how you will respond if something goes wrong, such as a product recall or data breach. Before diving into detail, it is better to understand the difference between business rules and business requirements. Business rules provide the foundation for process automation, while business requirements establish the success criteria for a specific project.

Successful companies have a culture of rules that define how to do business and a set of processes to ensure those rules are followed.

Rules are an essential part of any business. They help your company to operate more effectively and smoothly, with all team members following the same procedures and doing their jobs properly.

Rule-based systems can be great for ensuring that everyone works together effectively, but they also have disadvantages. As you might imagine, rules can get complicated and unwieldy over time—which makes it challenging to keep them up-to-date. If you don’t always have the latest version of a rule book on hand when you need it (and who does?), then it’s easy to go off track or make mistakes when navigating through them during meetings or transactions with customers and suppliers.

Business rules are the policies, practices, or guidelines your business uses to conduct business and determine its actions.

For example, a rule might require you to obtain customer approval for large purchases before purchasing them. Rules can be as simple as this one or very complex. To help ensure that your business operates by its goals and objectives, you must establish clear standards for how employees should do their jobs. The best way to create these standards is through written business rules and policies.

Types of Business Rules

Based on the professional need, the business rules can be categorized into the following:

Formula rule – this business rule allows users to create and maintain calculations in no-code format, just like Microsoft Excel. Once the formulas are created, they can be reused for appropriate process designs.

Decision table rule – this is a powerful business rule which allows non-developers to create and represent conditional decisions or “if-then” logic in a precise spreadsheet manner. Approvals and loan eligibility are some domains that use decision table rules.

Facts – these are the base points of creating basic rules. The facts can be classified based on quality, structure, and relationships.

Constraints – these are set conditions that are used to place restrictions on object structures. You can use these rules to set limits on any aspect of the business, such as setting limits as a minimum of $1000 for customers applying for a line of credit. This condition has to be true for the operation to take place.

Derivations – these rules are set to define under which circumstances facts can be collected from other sources. This can be further divided into inference rules and computation rules. Inference rules determine if the fact is true then a specific conclusion can be drawn. The computation rules use algorithms to make inferences.

Why are Business Rules Important?

An example of a business rule is accepting only payment for goods and services at delivery time.

Business rules are important because they help you make decisions quickly and efficiently while also avoiding confusion among your employees.

Business rules can be difficult to create because they can vary so much from one company to another. However, there are some common business rules that businesses usually follow:

• A customer should only pay for goods or services at the time of delivery
• Employees must be paid at least minimum wage

Businesses should have rules in place to ensure their success. Rules help businesses run more efficiently, save money, increase profits and improve customer service. They can also prevent legal problems with customers and civil lawsuits from employees who sue for wrongful termination or discrimination.

• A business rule is simply a statement about how something works that’s written down for everyone to see. It might be as simple as: “We open at 10 am on Mondays.” Or it could be something more complicated like: “If the customer has been waiting longer than 20 minutes without having a drink in front of them, we will give them an extra drink on the house.”

• Business rules are important because they help make sure that people do things right—and also because they let managers know when someone isn’t doing things right! For example, if you’re running an ice cream parlor and one day your employees serve someone who ordered hot dogs instead of ice cream cones (or vice versa), then this would violate one of your business rules—which means there needs to be some kind of action taken immediately by management before this happens again!

Benefits of Having Business Rules

Occasionally, rules vary between departments, locations, or teams.

To ensure consistent and fair application of rules, all company employees must be aware of them. A lack of communication can lead to confusion and mistakes, which can negatively impact the business as a whole. It is also important that each employee understands their role in upholding the rules (i.e., your job description) so they know how their actions will affect the business as a whole.

Features like Slack channels or email lists with subscribed members can help companies get all employees up-to-speed quickly on new policies or changes in existing ones before they go live.

Many companies start out without defined rules and processes and work with what they have until they experience some kind of problem.

Many companies start out without defined rules and processes, and they work with what they have until they experience some kind of problem. The best way to start is by defining the problem you want to solve, identifying the solution, and implementing that solution. Once you’ve done this, evaluate your results.

Implementing new rules can reduce costs, increase the number of customers over time and improve customer service.

Implementing new rules can reduce costs, increase the number of customers over time and improve customer service.

• Rules help to reduce costs by eliminating inefficiencies
• Rules help to increase revenue by improving customer service
• Rules help to improve customer service by reducing costs and increasing revenue

Examples of Business Rules

Manual decisions tend to be inefficient as “to err is human.” This can lead to higher operational costs, which delay project outcomes.

1. Dynamic Pricing Strategy

Businesses use the dynamic pricing strategy to change prices based on external factors constantly. They also sometimes do the price fluctuations within a matter of minutes. Their main aim is to sell the same product at different prices under different circumstances.

Airline industries commonly use this strategy. This is the cornerstone of their business model. They fluctuate the prices based on the number of available seats, seasonality, number of days before the flight, etc.

2. Insurance Underwriting

The underwriters in insurance collect information about applicants to determine their eligibility and coverage. To do so, the underwriter looks at the applicant’s salary, profession, medical conditions, lifestyle choices, family health history, etc.

Often, underwriters are overwhelmed by the sheer volume of applications that they need to handle. This prevents them from providing timely responses to the insurers which creates friction in the customer service process.

This is where business rules come to save the underwriters as it can streamline the underwriting process by carrying out a risk assessment. If the candidate meets the eligibility criteria then the application is passed for review and this process is accelerated using the business rules.

For instance, if an applicant is under 30 with no history of heart disease, and regularly does annual health checkups is eligible for the lowest coverage possible. Business rules can represent these types of requirements. Business rules complete the straightforward cases in minutes which allows the underwriter to focus on other important issues.

3. Fraud Protection in Banks

Banking and other financial institutions use rule-based automation to prevent suspicious activities, transactions, and claims. Authentication procedures in banks are triggered using business rules. For instance, when large amounts of credit card transactions happen, the bank’s fraud prevention department needs to contact the client and ask them to authenticate the transactions.

4. Discounts and Loan interest rates

Customer discounts are handled by business rules. For instance, when customers spend $1000 on their monthly purchases, they can get a discount of 15%. The staff members can easily set up a discount policy using business rules when the customer reaches a specific value. Moreover, banks generally collect large volumes of data, like the credit history of the borrower for a mortgage. Therefore, banks can efficiently use business rules to streamline loan processes and automate them.

5. Routing customer service calls, invoice processing, and documents

Routing customer service calls are as important as sales contracts and purchase orders. People get frustrated when they have to keep repeating themselves on customer service calls. However once the company leverages and implements business rules, automatically route calls to the respective department enhances a better customer experience.

You can also use business rules for routing certain documents that need multiple levels of approval. For example, a purchase order is created and submitted for the manager’s approval. The purchase order goes through the finance department before processing and approval. This would be a severe disadvantage if the manager had to approve every single purchase order.

Therefore, companies use business rules to set a specific value, for instance, $15,000, and only those purchase orders would be routed to managers. Anything below that value is directly routed to the finance department for final processing.

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Relationship Between Business Rules And Process Automation

Tribal knowledge is crucial for business people. Unfortunately, many businesses suffer from not having this tribal knowledge known only to certain employees. This tribal knowledge refers to the undocumented information necessary for making essential services and products. Not having this information might cause severe problems as it affects the product quality and customer experience.

Since this information is known only to specific people, once they leave the organization, the tribal knowledge leaves with them. Therefore, business rules can circumvent this problem by gathering all the knowledge from the subject matter experts and sharing it with other people in the organization.

The best way organizations can use business rules here is with the business process automation tools, where users can add conditional logic to workflows to enhance efficiency. Now let’s take a look at the relationship between business rules and process automation.

In reality, organizations don’t always document all of their business rules, as most of them have undergone digital transformation. Automation is the new business language, as traditional automation methods need business rules to be hardwired directly into the process workflows. The rigidity of manual automation methods limits an organization’s ability to do quick updates.

Since business logic changes over time, processes are likely to be disrupted and make time-to-time sensitive custom updates. Also, the IT department will make quick design changes and updates which can risk the potential risk of the same rule being repeatedly implemented.

Hence, business rules are modeled by some process automation tools like Cflow to help your organization stay agile and responsive. With the help of process automation tools, you can keep business logic from their corresponding process logic.

In other words, you don’t need a staff to go through each one-by-one process, and the changes will be implemented automatically. Also, business rules are compiled by domain experts in an easy-to-read format that can be read and understood by non-code developers too.

Moreover, organizations also use business rules engines to convert business rules into business logic in the runtime production environment. Nowadays, most business rules engine comes with fulls scale business rules management systems (BRMSs) which are real-time systems with the ability to automate the creation and implementation of business logic in real real-time project environments without depending on third-party applications, which can then be shared and accessed through a single repository by the entire organization. This is done to optimize the decision-making process, improve customer experience, and facilitate smoother organizational operations.

Business Rules and Cflow!

On a final note, business is not only about making money, but it’s also about providing good service to your customers. When you have rules in place, you can ensure that your employees follow them and each other throughout the day. This helps keep things running smoothly and reduces costs so that you can focus on providing great products or services.

As a part of the robust automation process, workflow automation and BPM tools like Cflow will help you gain agility, efficiency, and productivity for your business. With Cflow’s agility, you will become future-proof and gain a competitive edge by enabling digital transformation.

Cflow offers a full-scale lifecycle management platform that allows development, testing, production, and collaboration capabilities. Automation helps workflows to be created and implemented efficiently which in turn unifies your teams and enhances decision-making by setting the right environment.

For more information on how Cflow can help you discover and automate your business rules, signup for a free trial today.

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