The global financial system is now more interconnected than ever, and the consequences of inconsistency or unstable policy on monetary matters are felt far beyond any one organization. In the modern world economy, operational and policy problems within one country's finance organizations can have serious economic consequences for all countries.
As the ripple effects of these changes become more apparent, the ability to analyze and improve organizational processes is becoming a useful career asset. Although management methods such as Lean Six Sigma (LSS) are rooted in the manufacturing industry, many applications of LSS in accounting and finance can aid in resolving operational weaknesses and decrease risks across the organization.
Lean Six Sigma Benefits in Finance & Accounting Firm
Utilizing Lean Six Sigma principles Lean Six Sigma in finance and accounting can result in competitive advantages for businesses across all industries.
The case studies listed below provide a thorough review of how these methods and tools can improve the efficiency of processes; they can also help improve organizational culture.
Examples of Six Sigma in Finance and Accounting
Error Reduction
Lean Six Sigma allows for more efficient and focused processes in departments that aren't entirely concentrated on producing. A case study that focused on reconciling billings discovered that billing mistakes caused customer accounts not to be charged the correct amount due by around 60 percent. After the implementation of LSS, the company virtually eliminated the problem.
Problem Identification
One of the advantages of LSS is that it utilizes quantitative methods to pinpoint the key areas that have an influence (KPI). Once the efficiency issues of the KPIs have been discovered, LSS can be used to analyze the issues in a discrete and specific way.
Process maps are a key tool in LSS to identify KPIs and the associated problems. By setting the boundaries and the requirements of the process in place, professionals can pinpoint problems with the existing processes and then use the findings to enhance them or eliminate procedures that aren't producing value.
It is an important component that is a key component of LSS and is also known in"DMAIC" or the "DMAIC" or Define, Measure Analyze, Improve Control method. The combination of DMAIC and LSS strategies is a great method to analyze and improve the efficiency of a company.
If you are applying Lean Six Sigma in accounting, for instance, the department of Accounts Payable is an area of potential. Imagine a company having to process a larger number of invoices. They could use LSS to determine the rules to process a successful invoice, evaluate the current success rate following those guidelines, and then analyze the information gathered to determine where and why waste is taking place. The results could reveal that even though invoices are processed quickly, the time it takes for the managers to approve payments is far too long. If a bottleneck is discovered could be improved the approval process to ensure success and efficiency.
Similar to the application for a similar application of Lean Six Sigma in finance and banking, the processes involved with loans offer significant opportunities. For instance, a financial institution that wants to streamline its credit processing processes can begin by tracking each loan it handles for three months. The most important considerations in this process include the time and effort required to process the credit.
A wide range of time required to finish the tasks can signal efficiency gains. Then, LSS can be used to create a process map that lists each step and the connections between the steps. The most frequent areas for improvement in loan processing are cutting down on the amount of data that is manually processed and standardizing the method by which loan applicant data is gathered and stored.
Continuous Improvement
Lean Six Sigma is designed to be an ongoing improvement method; therefore, the education provided by LSS remains beneficial long after the initial launch. By implementing the DMADV (Define Measure Analyze Design and Verify) method, organizations can use it in developing new workflows and processes and improving existing ones.
Although the initial use of the technique is usually focused exclusively on specific products or improvements to processes, firms applying lean six Sigma to banking can yield results beyond the scope of their daily tasks.
Research studies that have examined the long-term benefits of implementing Lean Six Sigma in large enterprises have shown improvements in different areas of business. For instance, throughout Capital One's restructuring, a study found the following benefits of Lean Six Sigma:
- The reduction in the frequency of keying-in error errors
- Improved customer satisfaction
- More employee participation in LSS tools like DMAIC
The Key to Successfully Using Lean Six Sigma in Finance
Although Lean Six Sigma offers an efficient system for improvement, using tools like process mapping typically requires a change in the culture of the companies implementing these tools. One of the main characteristics of successfully implementing Lean Six Sigma in finance and accounting is the capacity to examine the processes in question objectively so that you can see that even if a procedure has been around for years. Still, it might not be the most efficient method to conduct business.
Another crucial aspect of a business's success is recognizing how internal processes can affect other stakeholders within and outside the organization. For instance, inefficiencies in the processing of invoices can cause difficulties for the other department to collaborate with vendors from outside.
When it comes to processes that have a wide-reaching ripple effect, such as those that affect accounting and finance, It is beneficial to employ an experienced and certified Lean Six Sigma Black Belt expert to oversee the project. This helps ensure that all important stakeholders are working toward the same goal and that teams can effectively handle the massive or enterprise-wide changes to processes.
Career Benefits of Learning Lean Six Sigma
Studies have shown that using six Sigma in finance has benefits in managing processes already in place and when seeking innovations. The approach has expanded beyond manufacturing and is now utilized in all industries.
Developing expertise in Six Sigma in accounting and finance environments can help prospective or current managers take their careers to the next step.
About IMC Institute's Online Lean Six Sigma Certificate Program
IMC Institute offers comprehensive online Lean Six Sigma courses for working professionals with varying amounts of Lean Six Sigma experience. Lean Six Sigma online Lean Six Sigma certificate courses help professionals meet the huge demand for Lean knowledge, skills, and the ability to obtain certification.
IMC Institute provides the following courses completely online:
