Finance & Management
Lean in Finance and Services: Success
can be contagious!
BY
Andrew Saul
Lean in Finance and
Services: Success can
be contagious!
Andrew Saul from The Leading Edge Group provides an overview on how
Lean can help your business save costs and become more efficient.
Andrew Saul is a Lean
Consultant with The
Leading Edge Group, an
international provider of
Lean consultancy and
training based in Cobh, Co.
Cork with offices in Ireland,
UK, Canada and Australia.
The Leading Edge Group
offer a range of training
options for companies
in the financial services,
manufacturing and
healthcare sectors.
www.leadingedgegroup.com
In recent years Lean thinking, once the
mainstay of the manufacturing plant, has
gained widespread acceptance, and indeed
acclaim in the services sector.
In the face of budget pressures, Financial
Service Providers, Internal Finance Functions,
Business Process Outsourcing, Contact
Centres and Other Customer Service
providers are turning to Lean to improve
their level of overall customer satisfaction
while positively impacting the bottom line.
The Value constraint of Speed, Cost and
Quality can be a difficult equation to balance
and getting the right alignment between
the overall objectives of the business and
the investment in initiatives to help deliver
these objectives can be challenging for all
Finance and Business Leaders.
The benefits of using Lean to drive
competitiveness and growth are well
documented, with most industry sectors
reporting significant reductions in lead
times, overall effort, cost and defects
whilst at the same time, increasing overall
financial performance, customer and
employee satisfaction – so why is Lean
not the normal way of working for all
businesses operating within the finance
or service delivery space? Could it be that
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the traditional view of how value is created
and service is delivered in these sectors do
not involve a product that can be visually
tracked from one step to the next in the
overall services production system? Could
it be that our perception as service delivery
experts do not involve processes? There
tends to be an array of reasons why some
of us in the Financial or Service sector
cannot relate to the delivery of a series
of transactional tasks as a process and
therefore a production system to maximise
value for our customers, even if those
customers are internal or external.
Lean is the constant pursuit of identifying
and eliminating waste within a given work
process by identifying the value added and
non-value added activities that make up
that process.
Lean enables a company to improve process
speed and quality whilst reducing cost
creating the conditions for a more effective
and efficient service which in turn helps
deliver a transformed customer experience.
Value added (VA) activities change the
form, fit or function of a product or service.
They are what the customer is willing to
pay for. Non-value added (NVA) activities
are waste from a customer perspective as
they do not alter a product or service in any
way but still take time, effort and money
to perform. Non-value added activities
may be further sorted into Necessary NonValue Add (NNVA). Necessary Non-Value
Add activities do not create any value for
the customer per se but may be a required
step in the process to meet its compliance
criteria, examples being government
regulation or legal requirements. This is
accepted as part of the cost of delivering
the product or service.
Non-Value Add (NVA) steps in a process
are waste and should be eliminated in
order to reduce lead time, reduce cost and
improve quality of the process output for
the customer. Typically NVA activities can
account for around 95% of total lead time
in delivering a service to a customer. So
if up to 95% of the activity associated with
delivering a service is waste, how do we go
about removing it to create additional value
for the customer and realise the benefits
for the business of doing so at the same
time? This involves looking a little closer at
how we categorise waste in our processes.
Lean thinking categorises and defines 8
wastes using an acronym “TIMWOODS” as
follows:
• Transport – movement of people,
products & information
• Inventory – unnecessary storing of files,
documents or stock inventory
• Motion – needless physical exertion
involved in completing a task
• Waiting – for instructions, information,
approval
• Over-production – Making more than is
required by the customer
• Over-processing – Tighter tolerances or
including more steps than are necessary
• Defects – Rework, errors, incorrect
documentation
• Skills – Under-utilising capabilities,
delegating tasks with inadequate training
It is the continual focus on removing these
wastes from our processes that delivers
increased value for our customer and
increased benefits for our businesses.
Lean in Action
The following detail discusses a real life
example from within the finance team in
a multinational communications company
supported by our consulting team.
In tandem with a very significant overhaul
of core processes, the CFO of the company
initiated a major effort to improve finance
department owned business processes,
with a view to support an overall company
transformation programme.
A large number of finance processes and
sub-processes were reviewed initially of
which eight emerged as high priority action
ACCOUNTANCY PLUS. ISSUE 01. MARCH 2014
Finance & Management
Lean in Finance and Services: Success can be contagious! by Andrew Saul
areas. The finance team conducted a detailed review and chartered
the improvement projects for all 8 which were completed in a phased
delivery in less than 12 months.
The following describes the success achieved in the first of these projects.
Accounts Payable
The business decided to focus on accounts payable as the first
project in the series as customer feedback, both internal and external,
was highlighting the need for immediate action.
The Problem:
Our client faced a monthly dilemma of incorrect assets and operating
costs which was reflected on the balance sheet and P&L. A control
account called the “Goods Receipt/Invoice Receipt (GR/IR)” account
was monitored for this imbalance and was the starting point for time
consuming efforts across a number of functions in the organisation
to resolve a large volume of blocked invoices, associated financial
commitments and retrospective purchase orders.
The Opportunity:
•
•
•
•
•
Improve reporting on P&L and Balance Sheet
Reduce the errors within the system through bad procurement practices
Manage cash flow more predictably
Reduce organisational effort in correcting the above
Create the conditions for continuous and sustainable improvement
The Impact:
During the course of applying Lean thinking, we further described
the extent of the problem and identified a series of improvements
events needed to solve the recurring problem of blocked invoices and
retrospective purchase orders on the SAP system.
•
•
•
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Retrospective POs = 18.6% of the total monthly volume
Retrospective PO Value = €22 Million per month
Invoices Blocked = 8% of the total monthly volume
Accounts Payable T&Cs = +23 days beyond SLA
The Results:
This diagnosis was followed by a set of improvement workshops over
a four week period resulting in:
•
•
•
•
•
Saving 400 days labour across the requestor functions in the organisation
Blocked invoices down by 80 %
Retrospective purchase orders down to less than 5%
Overall impact on cash flow of €17 Million
Monthly improvement events to improve the process performance
even further
Although this story reflects on only one success – success can
be contagious - the company went on to deliver a wider Lean
Transformation Program across the organisation led by the Finance
function. Within the finance function, the ways of working and
customer experience was transformed moving the function from
a perceived enabling part of the business to becoming the leading
function in driving growth, profitability and operational excellence
across the business.
Lean provides an operating methodology to transform existing
process performance and a sustainable path to process excellence
via continuous improvement. It has a direct and measureable impact
on the bottom line and is built upon the foundations of improving our
capability to recognise and remove process waste on a continuous basis.
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