Benefits of Six Sigma in Finance
Defects occur in every industry, including the finance industry. And Six Sigma is about reducing defects to 3.4 for every million opportunities. That may seem ambitious, but Six Sigma makes it possible. And for an organization’s finance department, where the margin for error needs to be small, it is a highly desirable outcome.
When it comes to handling matters involving money, there’s a need for a high degree of accuracy and precision. Organizations have been thrown into disarray over a single rounding error. Because of this, people have lost their jobs and stakeholders have been penalized and/or taken to court, among other undesirable outcomes.
With such grave consequences tied to financial errors, it is not hard to see why Six Sigma is perfect for an organization’s finance department. Here are the biggest benefits that Six Sigma brings to finance.
Keeps the Organization Financially Healthy
The financial health of the organization is what determines if it will survive in the long term. But how does the finance department determine it?
They can look at the cash the organization has or brings in, but that wouldn’t be enough to give them an accurate picture. This is because cash alone does not say anything about the financial processes of the organizations that actually keep it financially healthy.
Six Sigma emphasizes that organizations must measure performance at all levels. The financial department can use Six Sigma tools to identify Key Performance Indicators (KPIs) and measure the organization’s financial performance. And by monitoring the KPIs, they can identify patterns that signal the occurrence of a financial problem and help the organization prepare for it.
Doing this ensures that the organization remains financially healthy into the foreseeable future.
Saves Time and Effort
A major part of doing Six Sigma is the streamlining of processes. That means a process should be carried out with the least amount of steps and resources (e.g money, people, and information).
The problem with many financial departments is that they collect more data than they need. This needlessly conflates the amount of time it takes to complete a single financial process. By streamlining the data collection process, the financial department can focus only on collecting what they need.
This means they don’t have to process a lot of useless information, which saves them a great deal of time and effort. Furthermore, it means that they don’t end up tracking things that don’t matter and focus solely on the KPIs.
And since being highly organized is a part of Six Sigma, they can keep the data somewhere easy to find. This is important because the finance department usually handles more data than any other department. And it can slow things down to a crawl if a lot of time is spent looking for the data in dispersed computers, cabinets, flash drives, and cloud drives.
Helps to Proactively Handle Problems
When problems happen, Six Sigma not only helps you handle them, but it also helps you prevent them from ever reoccurring. It allows you to define and analyze the problem, figure out the root cause, come up with a solution and commit to continuous improvement.
It is a good thing that Six Sigma is industry agnostic. With its ability to significantly reduce defects or errors, finance departments can use it to their advantage. And when an organization’s finances are rock solid, the organization is ensured of long-term success.