Six Sigma And Finance
The success of Six Sigma implementations depends on the ability of the implementation teams to identify and alter systems that are responsible for the efficiency of a business process. For successful implementation of Six Sigma concepts and methodologies, organizations need to increase coordination between all the teams involved in the implementations. Consistent support and guidance from senior management is also necessary for ensuring the success of Six Sigma initiatives.
Six Sigma Implementations And The Finance Department
Six Sigma implementations do help in reducing operational costs, but an organization cannot afford to make strategic decisions based on vague assumptions. Organizations need to measure the monetary value of benefits that is being derived through the implementations. The task of assessing the financial spin-offs of the implementations is often entrusted to the finance department that assesses the improvements in relation to the organization’s bottom line.
The finance department utilizes project tracking software that measures the improvements being made and generates reports showing the financial payoff. The software is used all throughout the implementation process and the data collected is stored for future referrals. This is important because Six Sigma programs aim at continuous quality improvements, normally a 30%-60% improvement in around 6 months. Data available from past implementations makes it easier to deploy new Six Sigma concepts and methodologies in an organization.
Selecting The Most Suitable Finance Personnel
For ensuring that the financial functions are successfully carried out, organizations need to select only the most experienced employees. Outsiders can also be hired for this purpose but it is always better to opt for existing employees as they have a better understanding about the organization’s business processes.
If the selected employees are new to the concept of Six Sigma, it is necessary to provide adequate training before allocating them the responsibilities that they are supposed to shoulder. Finance personnel selected by an organization, act as the official scorekeepers and report any deviations that might affect the organization’s bottom line.
Finance And Quality Issues
Quality improvements are one of the main objectives of Six Sigma implementations. However, for producing high-quality goods or services that satisfy customer needs, it is necessary to deploy the financial measurement tools and systems at all stages of the implementation process. At the start of the implementation process, a financial impact analysis is conducted to identify the derivable monetary benefits. During the implementations, the actual monetary value of benefits is assessed and reported to the senior management. During the final stages of the implementations, the actual and planned results are compared to provide the necessary feedback to the quality department.
The success of any quality improvement technique such as Six Sigma can be ensured if the implementations are done in accordance with quantifiable financial results. The financial skills of selected personnel also go a long way in ensuring the success of Six Sigma implementation programs.
Staffing Accounting – Finance Department For Start – Ups to Medium-Sized Companies
I have had a lot of conversations recently about staffing the accounting and finance function in the company. As companies grow and shrink, their needs in this area change. We certainly do not want to be over-staffed, and we also want the most cost-effective staff doing as much of the work as possible. For example, we typically do not want our Controller or CFO entering payables – this task can easily be delegated to a much lower cost employee.
In a a simplified organization chart of the different accounting and finance functions, a CFO would be at the top of the chart with a Controller reporting to her. The Controller would have staff in AR, AP, and Payroll along with one or more accounting managers over one or more of those functions. The reality is that most start-up and emerging companies cannot afford all of these positions. My purpose in this post is to explain how to fulfill all of these necessary functions throughout the life-cycle of a start-up company. I am making the assumption that we all understand the purpose of the accounting/finance function as well as the assumption that the company has or will hire the appropriate outside professional(s), like a tax CPA, to help the company remain compliant.
Even at the earliest stages of a start-up, it is usually best to hire a part-time bookkeeper to fulfill all of the roles listed above. They usually do not have the expertise of a high-level controller of CFO, and they will be slightly over-paid for doing some of the more clerical tasks. But the bookkeeper gives an affordable and flexible option to start-ups.
As the company grows and has revenue, the company should begin to look to hire full-time clerical staff to handle most of the AR, AP, and payroll tasks while the bookkeeper remains part-time and delegates everything they possibly can to the in-house staff. One of the major challenges that usually emerges during this process is that the part-time bookkeeper will begin to struggle to keep up, especially with the monthly financial statement preparation and analysis as well as other management reports on how the business is doing and what improvements should be made to maximize cash flow.
Often the next best step is for the company to consider engaging the services of a part-time CFO. This individual will be a strategic direction to this department and may only be needed about a half-of-a-day per month. As the company continues to grow, the part-time bookkeeper will need to be replaced by a full-time Controller or Accounting Manager. All of the full-time accounting staff will report to this person. In addition, this position will take direction from the CFO.
The last full-time hire should be to fill the position of CFO. Often companies can do very well leaning on the part-time CFO services to exceed $50 or even $75 million in annual sales.
The Benefits of Cash Flow and Working Capital Management
Trade finance is an important part of the business. It offers various aspects of managing finances for the company. Trade finance helps to generate, manage and establish various finance practices like working capital, factoring solutions, banking solutions, loans, guarantees, discounting, etc.
Various trade finance companies help to provide credit finance, export finance, credit protection, invoice collection services, etc. Trade finance companies help to reduce marketing cost and increase your trade profitability. They also help in increasing the sales by promoting the products, services or the website around the world. Trade finance companies also help in broadcasting the trade leads, generate new business and promote the company to new business groups or business ventures. Trade finance companies help in eliminating most of the commercial and political risk normally retained by the company or any small or medium business owner. These trade finance companies also provide 100% financing solutions. Some of these companies or agencies are factoring agencies also that help in facilitating international trade through factoring and other related trade finance techniques.
Export oriented trade finance companies provide finance support system for enhancing cash flow, reducing finance costs. Export trade finance companies or agencies also provide information and support for export working capital, Export Import Banks, financing, loans, loan forms, guarantees and forfaiting. It is important to know about some of the export trade financing companies, agencies, or financial institutions like AFIA, Export Express, Factors chain international, etc. Some agencies with their special trade finance programs and techniques help small and medium business owners to find needed capital to succeed. They also help in pre-order financing of labor, materials, goods, machinery, financing of receivables, issuing letters of credit, etc.
Apart from companies and agencies there are several government organizations that assist companies with their export venture. These federal governmental organizations offer services that range from export loan guarantees to loan assistance. They also serve as specialized associations that offer advice and counsel to interested small and medium business owners. Moreover, they also organize and provide seminars, lectures, convocations and publications on topical areas of trade finance techniques. They also server as a medium to exchange information between organizations, companies, agencies, that indulge in trade finance. Professional trade finance companies and institutions seek to promote good and moral trade practices amongst the trading parties.
Trade financing be it for the local market or the international market for exports, begins from the first stop at the banks. It is important to identify the source that provide trade finance or risk mitigation. Factoring, forfaiting, loans, bank guarantees, letters of credit, export financing are various trade finance practices.
Factoring allows the business owner to calculate the present value of future amount due or sale of a firm accounts receivable to a financial institution known as a factor. Invoice factoring helps the small and medium business owners to obtain immediate cash required for business without owning and debt or transferring business equity. These business owners sell their invoices in order to receive money today.
Forfaiting is a practice of trade finance, which is used as an alternative to the export credit or insurance cover. It allows exporters to obtain cash and eliminate their risks by selling their receivables on a ‘without recourse’ basis. These trade finance practice act as resources of fund management, credit management, loan elimination and increasing profitability by cutting administration and marketing costs along with the overheads.