Lean and Six Sigma principles got their start in manufacturing businesses. They were used to improve the quality of products and reduce inefficiencies, resulting in happier customers, safer employees and improved turnover for companies. Since then, Lean Six Sigma has been applied in almost every industry. The systems it provides help businesses improve what they do, and that represents a major opportunity for the accounting and finance departments that keep our companies afloat. With all the challenges that come along with managing money, there are often plenty of opportunities to apply Lean Six Sigma to your finance departments, improving their productivity and the business’s bottom line.
Using Lean Six Sigma in Finance
Finance departments of organisations are often businesses that have a large number of moving parts. The complexity of the work and its reliance on the expertise of the employees mean it is often difficult to define processes and make improvements that reduce costs and inefficiencies.
Lean Six Sigma teachings provide practitioners with the right tools to help them define finance processes, break them down into stages and then assess those steps for inefficiencies. It can be difficult to effect change to an accounting system that requires a large amount of human input, so defining the process is the most important stage of your Lean Six Sigma project. Identifying each step and breaking down its role in the process is the best way to find slowdowns and bottlenecks and then develop a plan to resolve them.
Defining Your Key Performance Indicators (KPI)
Knowing how to measure your results is the key to success when applying Lean Six Sigma principles. Since finance can be a complicated discipline that relies heavily on its human element, measuring the effects of your projects is difficult. The ideal KPI is one that generates meaningful, measurable data that can then be used to evaluate the results of the project. KPIs should be detailed and concrete, making them easier to track, less prone to change throughout the project and less dependent on the interpretation of individual process managers.
Measuring the Benefits
In most cases, process improvement teams will find that the best measure for improving finance processes is monetary. Since the department usually isn’t directly related to the quality of products or services provided to clients, inefficient processes typically result in costly wasted time, bottlenecks or double handling. The main benefits of applying Lean Six Sigma to your finances is likely to be measured as one of the following:
- Cost reduction. Improving the bottom line is a key motivator for many process improvement professionals. Inefficiencies express themselves as costs to the business, especially in the form of excess wages, lost productivity or lost opportunities for business.
- Improved work capacity. Inefficient processes present as unnecessary work or reduced productivity for teams. Eliminating time and process wastage from your finance teams is likely to improve their capacity and productivity, which will be simple to measure as a function of how much work they are completing, or how long each step of the process requires. Improving your teams’ work capacity not only results in more productivity for less effort, but it also frees up time to help the business pursue new goals, such as taking on new clients or developing new products.
- Revenue changes. You can measure the result of your Lean Six Sigma projects through changes to revenue. Growing revenues are an obvious choice, but you may also choose to measure metrics such as client retention, lifespan or total spend.
Applying Lean Six Sigma to Your Business’ Finance
With a stronger bottom line and fewer inefficiencies, Lean Six Sigma has a lot to offer to every corner of your business. Keeping your financial situation stable is important, no matter the industry you’re in, and a process improvement project is one of the best ways of eliminating waste in your business. The Lean Six Sigma courses offered by Thornley Group are an excellent opportunity to give your managers the tools they need to make improvements. Get in touch with us today for more information or to book your next certification.