Business Finance Consulting

Lean Finance – Continuous Improvement

After having in previous blogs highlighted the first two principles of Lean as they relate to the Finance function, Adding Value and Reducing Waste, let’s talk about the third and final principle of Lean: Continuous Improvement.

Broadly speaking, Lean projects need to commence with a Lean Analysis to assess the existing situation and determine the scope of the Lean Transformation project. From this, the Lean Transformation project can be further developed and implemented, focussing on opportunities to add value and reduce waste in order to optimise outcomes for the company (i.e. including the Fat Profits referred to in our book ‘Lean Business,Fat Profits’).

However Lean does not end when the Lean Transformation project is completed. Lean is a mindset, continually looking for incremental improvements.
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Business Process Improvement

Process Improvement – Mapping

In order to improve any operational process and provide greater customer value, business processes first needs to be understood, and the easiest way to understand a process is by drawing or mapping it. Mapping forms the basis of all process improvement as it shows:

  • The current state i.e. “this is how we presently do it”
  • The link between information and material flow
  • Mapping visually describes your facility…..a picture is worth a thousand words
  • Highlights process steps and identifies areas of waste. Remember the general rule: “The more process steps, the more waste a process has”
  • Supports team-based improvement
  • Provides a model and common language for Continuous Improvement (CI).

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Business Finance Consultants

Waste in the Finance Function? Surely Not!?

In a previous blog, we discussed applying the first principle of Lean (‘adding value’) to the Finance function. Today, let’s consider the second Lean principle: ‘Reducing waste’.

Yes, there can indeed be waste and missed opportunities in any Finance Department.

Here are a few common examples:

  • inefficient collection processes
  • the same data being manually entered several times in different systems
  • reports being generated for people that do not understand them and/or do not use them (in which case they are obviously not helping to guide the business)
  • complex report generation that requires the collection/analysis of data from multiple systems
  • cost allocation that does not add value to the decision making process, and
  • inappropriate budgeting processes that do not deliver outcomes aligned with the strategy of the business.

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Business Finance Consulting

Can Finance be LEAN?

Most of our readers will be familiar with ‘Lean’ methodology and principles, which have been around for a number of years. But, like most people, some readers might primarily associate ‘Lean’ with manufacturing and everything that is linked with production.

In actual fact however, ‘Lean’ can be applied to every function in a business, including Sales, Marketing, Human Resources and Finance.

The Finance function is the same as all other functions in a company: It has processes (accounting, controlling, collection and reporting to name a few), which can be optimised through the application of Lean principles.

The three key Lean principles are Adding Value, Reducing Waste and the Continuous Improvement. Read more