The international financial environment is more
interconnected than ever, with the effects of unstable or inconsistent monetary
policies being felt far beyond a single organization. In today’s globalized
economy, policy and operational problems in one country’s financial organizations
can have severe economic consequences across the world.
As these ripple effects become more and more noticeable, the
ability to critically analyze and improve processes across an organization is
an increasingly valuable career skill. While management techniques like Lean
Six Sigma (LSS) have roots in manufacturing, there are numerous applications
for LSS in finance and accounting that can help to correct operational
inefficiencies and minimize risk across an organization.
Benefits of Six Sigma in Finance and Accounting
Applying the principles of Lean Six Sigma in finance andaccounting can create competitive advantages for organizations in nearly every
industry.
The case studies highlighted below offer a detailed look into
how these methodologies and tools can be used to do more than streamline
operations—they can also improve organization-wide culture.
Examples of Six Sigma in Finance and Accounting
Error Reduction
Lean Six Sigma Green Belt Certification allows for more focused and efficient
operations in departments that are not entirely focused on manufacturing. One
particular case study that focused on billing reconciliation found that billing
errors resulted in customer accounts being charged less than the amount due
approximately 60% of the time. After implementing LSS, however, the
organization nearly eliminated this issue completely.
Problem Identification
One of the strengths of LSS is that it uses quantitative
methods to identify key points of impact (KPI). Once efficiency issues within
these KPIs have been identified, LSS can be used to discreetly and specifically
tackle those problems.
One of the essential tools in LSS for identifying KPIs and
any associated issues is the process map. By defining the boundaries and needs
of the current process, professionals can identify issues with existing
procedures and use these findings to improve them or remove processes that
aren’t generating value.
This is a key element of LSS and is referred to as the
“DMAIC” or Define, Measure, Analyze, Improve, Control methodology. Pairing
DMAIC with these LSS strategies offers a powerful way to objectively analyze
and improve operations within an organization.
When applying Lean Six Sigma in accounting, for example, the
Accounts Payable department is a key area of opportunity. Imagine a company needs
to process a higher volume of invoices. They can use LSS to define the
guidelines for successfully processing a completed invoice, measure the current
success rate based on those guidelines and analyze the data gathered to
identify where and how waste is occuring. The results may show that while the
invoices are completed in a timely manner, the wait time for managers to
approve payments is too long. Once a bottleneck has been identified, the
approval process can be improved to control the future success of the process.
For a similar application of Lean Six Sigma in finance, the
processes associated with loans are key opportunities. For example, a bank that
wants to streamline its credit processing operations can start by tracking
every loan it processes for three months. The important factors to consider for
this exercise are the time and effort required to fully process credit.
High variance in the amount of time it takes to complete
these tasks is a sign that efficiency improvements can be made. From there, LSS
can be used to build a process map that identifies all the steps, as well as
the relationships between them. Common areas for improvement related to loan
processing include reducing the amount of manually processed data and
standardizing how loan applicant data is collected and stored.
Continuous Improvement
Lean Six Sigma is designed to be a continuous improvement
system, so training in LSS continues to be useful well past its initial
introduction. By implementing the DMADV (Define, Measure, Analyze, Design,
Verify) process, organizations are able to apply it to the creation of new
workflows and processes in addition to improving existing ones.
While the initial application of the methodology often
focuses directly on specific product and process improvements, companies such
as Capital One have found that applying lean six sigma in banking yields
results that go far beyond their day-to-day work.
Studies that have looked at the long-term effects of applying
Lean Six Sigma in large companies have found improvements across many areas of
business. For example, throughout Capital One’s restructuring, one study
identified the following LSS-driven benefits:
- Reduction in the rate of keying-in errors
- Increase in customer satisfaction
- Greater employee buy-in for LSS tools such as DMAIC
The Key to Successfully Using Lean Six Sigma in Finance
While Lean Six Sigma offers a powerful framework for
improvement, effectively leveraging tools like process mapping often requires a
culture shift in the organizations that adopt them. One of the key traits of
successfully leveraging Lean Six Sigma in finance and accounting is the ability
to step back and look at existing processes objectively to recognize that, even
if a process has existed for decades, it may not be the most efficient way of
doing things.
Another key element to success is recognizing how internal
department processes may impact other stakeholders throughout and outside of an
organization. For example, inefficiencies in processing invoices could make it more
difficult for other departments to work with external vendors.
For processes with far-reaching ripple effects, like those in
finance and accounting, it is helpful to have a certified Lean Six Sigma Black
Belt professional to lead the project. This can ensure that key stakeholders
are aligned toward a common goal and that teams can effectively manage the
complexity of large-scale or company-wide process change.
Career Benefits of Learning Lean Six Sigma
As research has shown, the application of six sigma in
finance provides benefits when managing existing processes as well as when
pursuing innovation. The methodology has expanded far outside of the
manufacturing sector and is now used across virtually every industry.
Developing expertise in six sigma for both finance and
accounting environments can help aspiring or current managers take their
careers to the next level. PayScale shows the average salary for a Continuous
Improvement Manager with a Black Belt Lean Six Sigma Certification is more than
$93,000, compared to a salary of less than $83,000 for that role overall.
About Purdue’s Online Lean Six Sigma (LSS) Certificate Program
Purdue University offers comprehensive online Lean Six Sigma
(LSS) certificate programs designed for working professionals with varying
levels of Lean Six Sigma experience. The online Lean Six Sigma certificate
courses prepare professionals to satisfy the immense demand for Lean expertise,
skills and certification.
Purdue offers the following courses 100% online:
- Lean Six Sigma Green Belt
- Lean Principles
- Lean Six Sigma Black Belt
- Lean Six Sigma Green Belt Refresher
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