Lean Finance and Accounting

Lean Leads to Sustainable Improvements for Finance and Accounting

Nov. 5, 2013
Lean helps accounting and finance organizations identify the value they provide to their customers, focus on the processes that deliver value, and eliminate wasteful activities wherever they exist.

Lean cuts through organizational barriers by bringing people together to improve entire value chains, rather than fixing problems in each silo. With this end-to-end view, people can clearly see how their work impacts their coworkers and contributes to end products. Because lean demands elimination of waste and quality-at-the-source, everyone involved in a process must assume personal responsibility for doing their work correctly and efficiently.

Problems are treated as opportunities to improve, and people are empowered to cooperatively resolve issues and make the workflows more efficient. In this way, lean encourages communication and problem-solving.

Too Busy Fighting Fires to Shut Off the Gas

Even when problems are solved and improvements made, it’s notoriously difficult to execute back office workflows consistently. New problems, unresolved issues and everyday distractions constantly eat away at the desired routine until managers are once again embroiled in fighting fires. Many finance and accounting managers are so busy dealing with capacity constraints and deadlines that they fail to establish a routine workflow for themselves.

In a recent PwC study, we found that sustaining high performance requires repetition and disciplined problem solving by managers as well as staff. The manager’s role in a lean, high-performing operation is to clear the way for staff to perform work smoothly and efficiently. Along with improving the transactional processes they oversee, managers should create standard work cycles for themselves so they can consistently support their areas of responsibility.

In lean organizations, these managerial workflows include repeated cycles of visual management and real-time observation, problem identification and improvement initiatives. Increasing the structure of these management activities leads directly to higher departmental performance.

Improving Finance is Hard Work

Executives often lament that problems in finance and accounting are impervious to lean improvement techniques from the shop floor, and how productivity and quality gains end at the factory floor and warehouse door. But there are important differences between back office workflows and traditional operations where lean management first evolved. Regulations are a moving target. Analyses are rarely the same. Information—both good and bad—comes from all over the enterprise. On the surface, finance doesn’t look much like the shop floor.

Yes, we feel their pain. Finance and accounting are certainly different than manufacturing, and making these workflows more efficient and reliable can be hard work.

Yet, despite these differences, many companies use lean techniques to improve customer value, employee engagement, productivity, quality and service levels in their offices. Lean helps accounting and finance organizations identify the value they provide to their customers, focus on the processes that deliver value, and eliminate wasteful activities wherever they exist.

In fact, lean works exceptionally well in finance and accounting, but it requires understanding the environment and adapting the toolkit appropriately. It also demands that both staff and management adopt lean practices in their everyday activities.

Taming the Unpredictability of Finance

The inherent unpredictability of analytical functions makes it hard to predict how long any given accounting or finance activity will take to complete. Simple tasks are seldom the same, and even the most transactional accounting processes are peppered with labor-intensive checks and controls, large and small, that add complexity and potential problems. This is a big deal because uncontrolled variability puts quality and service levels at risk.

Lean addresses unpredictability by grouping and prioritizing deliverables according to how often they are needed. Improvement initiatives naturally start with the routine, repetitive transactional flows like order-to-cash, purchase-to-pay, payroll, etc. Even highly specialized analyses can be categorized as commonly occurring, frequent, or unique.

Once the deliverables are grouped, then you can create standard work tasks and optimized workflows for the ones that happen most often. Standardizing this work promotes repeatability and predictability, with the significant side benefit of reducing reliance on uncontrolled custom spreadsheets.

Shift the Focus from “Get It Done” to “Make It Better”

You've probably had your share of one-off projects that deliver some improvements—for a while. If nothing except the process changes, then people usually fall back into old habits and the results eventually disappear. The real power of lean is in continuous improvement, when results materialize quickly, changes are embedded permanently and momentum leads to even greater results down the road. This is where lean truly outperforms other improvement methodologies, by establishing a structured improvement cycle at all levels of the organization.

Lean is especially effective in the finance and accounting arena. It helps your organization focus on what’s truly important—delivering timely and accurate financial information. It helps you perform processes with more consistency and reliability, finding creative ways to reduce steps, time and costs without sacrificing quality.

Lean also helps you identify tasks that consume time and resources but don’t add value. Once the improvements are in place, lean provides a template for managers to sustain high performance and continuously increase the organizational value of finance and accounting.

John A. “Jack” Kahler is an advisory director with PricewaterhouseCoopers, focused on operational excellence in finance and back office workflows. He can be reached at [email protected].

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