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
2006.

Reviewed by Steve Lodge.

Find this article useful?

Get more great articles like this in your inbox every lunchtime