Financial waste

The finance department has its share of wastefulness, from unread reports to unused forecasts.

by McKinsey Quarterly
Last Updated: 23 Jul 2013

There are also wide efficiency differences: in benchmarked consumer goods companies, the best finance department was found to be nine times more productive than the worst; among the largest European firms, it took between 55 and 200 days after the financial year-end to publish the annual numbers.

Borrowing from lean manufacturing ideas - focusing on external customers, exploiting chain reactions (ie, addressing new problems when resolving others) and drilling down to expose root causes - is suggested to eliminate waste and improve efficiency.

It is noted that whatever problem an organisation faces, finance's default answer is often to add a new system, which rarely tackles the real issues. This study warns that it can take years to introduce lean principles and that a new mindset is needed. Ultimately, however, a leaner finance function will reduce costs, increase quality and better align corporate responsibilities.

Toward a leaner finance department
Richard Dobbs, Herbert Pohl and Florian Wolff, McKinsey Quarterly, April

Reviewed by Steve Lodge.

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