8/3/2019 Creating a Lean Finance Organization

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CREATING A LEANFINANCE ORGANIZATIONSIX FOCUS AREAS FOR EFFICIENTSERVICE DELIVERY

 © Copyright 2011 | Stephen G. Lynch | All Rights Reserved  1

GlobalFinance360

 “There is nothing so worthless as doing efficiently that which should not be done at all." 

--Peter F. Drucker

Every finance organization has as its goal the effective delivery of services to itsorganization at the least possible cost. Yet most organizations continue tostruggle with making this vision a reality. Fortunately, there are organizations thathave made the journey to delivery excellence and have provided a roadmap forothers to follow. Through the process of achieving delivery excellence, thesefinance organizations are able to focus their energies on strategic activities thatadd real value to the business and position them as true business partners.

How do these finance organizations accomplish this? While every company isunique, there are established patterns of behavior that separate these leadingcompanies from the rest. Key focus areas include:

Reduction in process complexity 

Lean finance organizations focus on creating processes that support corporatestrategy while eliminating undue complexity. The components of the process

value chain are well understood and documented. Steps in a process that addlittle or no value are eliminated in a continuous effort to simplify and streamlinethe processes.

Although leading finance organizations focus on reducing process complexity,they still enforce rigorous internal controls that balance the twin goals of reducingprocess complexity while maintaining an appropriate internal control structure.These controls should reflect the underlying materiality, risk and impact ofpotential errors. There should not be a “one size fits all” perspective on internalcontrols. As processes are designed and maintained, it’s essential to build inproper controls without over-engineering them. An improperly designed controlstructure adds to process complexity.

Standardization of processesStandardized and easily repeatable processes are essential to reducing cost aspart of the lean journey. As part of the transformation effort, each financeorganization must go through the exercise of determining which processes enableand support sustained competitive advantage and which processes arecommoditized. Processes which are essentially a commodity and don’t supportsustained competitive advantage should be standardized across the organizationto improve efficiency and reduce cost.

“The journey to 

becoming a lean 

finance 

organization 

takes vision,

discipline and 

effort. Yet the 

rewards are 

substantial for 

organizations that 

achieve the goal 

of high 

performance supported by a 

world-class cost 

structure.

Finance can make 

substantial 

progress towards 

its goal of 

becoming a lean 

organization by 

implementing 

these six key 

concepts.” 

Author: Stephen G. Ly

8/3/2019 Creating a Lean Finance Organization

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 © Copyright 2011 | Stephen G. Lynch | All Rights Reserved  2

About Global Finance 360

Global Finance 360 covers the

world of corporate finance and

accounting and how these

activities are impacted by

globalization. Focus areas

include Finance Delivery

Strategy, Shared Services,Business Process Outsourcing,

Process Improvement and

Organizational Design.

Global Finance 360 is run by

Steve Lynch. Mr. Lynch is a

Principal in the Finance

Transformation practice of a

global consulting company. He

is responsible for the marketing,

sales and delivery of Finance

Transformation services in North

America and serves as a key

liaison for his company’s global

Finance practice. He brings

more than 15 years of

experience advising global

companies on their service

delivery strategies and has

served over 60 clients in a

variety of industries including

consumer product and industrial

manufacturing, aerospace &

defense, transportation,

technology, entertainment and

financial services. He has also

served as a Controller in private

industry and as an auditor inpublic accounting.

Mr. Lynch is an active content

contributor on the topics of

Finance Transformation and

globalization and has presented

at various forums including the

IQPC Shared Services &

Outsourcing conference. He can

be found on the web at

www.globalfinance360.com.

Contact Information:

Steve Lynch

Toll-free: +1.800.216.2512

Office: +1.719.481.2599

1042 W. Baptist Road

Suite 194

Colorado Springs, CO 80921

slynch@globalfinance360.com

www.globalfinance360.com

Standardization of core applications

Leading companies know that strong technology support facilitates standard andefficient processes. When an organization’s processes are integrated end-to-endby enabling technology, relatively little time is spent manually collecting andreformatting data. By reducing manual intervention, higher transaction volumecan be achieved with a lower cost per transaction. This integration also enablesthe finance organization to focus on higher value-added activities that support

business operations. Standardized processes enabled by technology alsoimprove the change management process by reducing the time needed to trainpersonnel. It also provides the platform for “plug-and-play” integration for anypotential acquisitions.

Strong data and process governance

Without a strong governance function to provide oversight to the financeorganization and its processes, any advances made will eventually be lost due tothe lack of control over those processes. While there are many aspects ofcorporate governance, two essential areas that should command the focus ofmanagement include governance over data and processes. Finance, along with

its business partners in the organization, must define the data and informationthat has relevance for its chosen strategy. Lean finance organizations maintaineffective governance over information assets and the related processes to ensurethat inefficiencies don’t creep in and that consistency is maintained over time.

Comprehensive delivery model

Lean finance organizations focus on building a comprehensive delivery strategythat incorporates both captive and 3rd party suppliers. An organization’s servicedelivery strategy should support the overall corporate strategy and includes aconsideration of the company’s existing and planned business lines andgeographic presence. It also includes an objective analysis of the supplier-sidecapabilities from both the captive service organization and 3rd party service

providers. Another consideration is the global distribution of support servicesincluding an analysis of onshore and offshore delivery options. Lean financeorganizations make effective use of 3rd party and offshore service providers toadd capabilities to their organizations while driving down cost.

Performance metrics that support strategy

The saying “what gets measured, gets done” is relevant for finance organizations.As finance crafts and executes the strategy required to support corporate strategyand to perform as a true business partner, performance metrics that track theexecution of that strategy should be collected and evaluated to measure the

 journey as a lean finance organization. An integrated scorecard that ties to

corporate measures should be updated and reviewed regularly by managementto ensure that timely corrective measures are taken if the finance organization isnot meeting its defined goals.

Conclusion

The journey to becoming a lean finance organization takes vision, discipline andeffort. Yet the rewards are substantial for organizations that achieve the goal ofhigh performance supported by a world-class cost structure. Finance can makesubstantial progress towards its goal of becoming a lean organization byimplementing these six key concepts.