If you are working in Finance, Lean Six Sigma is a great method to improve your processes.
Are you a Finance manager, CFO or Head of administration? One of the first projects I always do with people from Finance is to reduce the reporting period of your monthly financial statement and operational figures. Many times companies need over 20 working days to provide these reports.
Why is it important to reduce the lead times for these reports?
- It is a waste to spend so much time on things of the past
- The management needs this info quickly to make decisions
- Situations change and figures start losing their value.
If you spend almost a month, collecting data, entering in spreadsheets, making charts, analyse deviation from the budget … then time has passes, the situation has already changed, so you are basically working on historical figures that are not relevant anymore. Managers and leaders need their figures quickly, so they can act on the current state of affairs and take better decisions at the right time. Like tis they can avoid problems and use opportunities.
So they need quick insight in the financial figures, profit and loss account, balance sheet, cash flow statement and other operational data, like: leads, conversion rates, sales, claims, shipment figures, on-time delivery reports etc.
How can you reduce the time for your reporting?
Firstly, you need to measure the time you have needed up to now. For example over the last 6 months – look at the dates the reports were submitted by email to the management and calculate the number of days that were needed. This is the lead time of the process.
You can display this in a timeline, you can calculate the average time it took and look at the variation over the months.
The second step. You to put a team together. Optimal team size is 4 to 6 people. There should be people in the team from the Finance department, but also people from other departments who deliver figures for the report, for example from HR or Marketing&Sales. Best is to have team members representing each part of the process we are working on.
The third step is to get the team together and start analysing the problem. You set a target for the lead time – reducing it by 50% might be good target. Team will be shocked first, but they need to be challenged. With the team you brainstorm about why it currently takes 20 days instead of 10 to prepare the reports. You can use an Ishikawa or fishbone diagram for this. It helps you to look at the problem from different angles, like: the process, attitude of the people, facilitation and others.
You can use my book to learn how to best use the Ishikawa diagram: https://herku.com/product/profitable-empowerment-hardcopy/
After identifying the causes, you select those that you think have a big impact on your lead time, that are not too expensive and too difficult to tackle in relatively short term and that are in you grasp, in your power to do something about. It is key to the project that you select the right causes here.
Based on this handful of main causes, in your next meeting, you are going to establish countermeasures that will tackle these main causes.
For example: One of the main causes is that you have no clear planning for the reporting. People don’t know what exactly they have to deliver by when and who is responsible for it. If this is one of your main causes, you will discuss with your team how to solve this. You will set up a clear planning, with clear responsibilities and deadlines for each piece of information and working task needed. This is the Improve phase of the project.
After you have established certain countermeasures, you start to implement these as actions. In the meantime, you continue to collect data. In this way you can monitor if you see a drop of the lead time of your monthly reporting.
You might need to measure only a few months more to be confident that the new way of working, the new process, e.g. with the new planning, you will have shorter lead times.
If you see good, steady improvement, it is time to summarize your work in what we call a Control Plan. What was your output – the lead time. Your target – 10 days. How did you measure it? What actions have you taken to reduce lead time: e.g. planning, holding people accountable. Maybe you set up a kind of reflection meeting every 2nd month to see what is working and what can be improved.
Part of the Control Plan are also measures to continue to monitor the output of the process. Who will do this, when and how? In case you will see the lead times increase gain, you can fall back on this summary of the Control Plan.
A short Round Up
- You have a project in Finance – for example how to reduce the reporting lead time
- You measure the problem
- You get a project team together
- You analyse the causes of the problem and prioritize them
- You establish countermeasures and carry out improvement actions
- You measure if the actions are successful
- Finalise with a summary, the Control Plan, to be able to monitor and step in if needed in the future.
So, if you work in Finance and you want to reduce the lead time in reporting or you want to tackle other issues, visit our website https://herku.com and lets start your first project with Lean Six Sigma!