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European Students of Industrial Engineering and Management
www.estiem.org
ESTIEM LSS Green Belt Case
1
Increasing profitability of standard accounting customers
The Friendly Accounting Co.
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 1
2
The Friendly Accounting Co. is a traditional and conservative accounting company with long
traditions from the 1950’s. With branches all around Finland, it has been a dominant player in
the industry for quite a long time. The Friendly Accounting Co. has been profitable from the
beginning of its foundation, but recent advancements in technology have taken a toll to TFAC.
It has begun to lose its grip on customers due to better digital services available and rapid
advancement of small nimble players, who have the ability to adapt to customer needs faster.
That is why Juhani Sysimetsä, the CEO of TFAC, made a decision in 2014 to launch a round of
experiments to create a new kind of service model to keep up with competition.
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 2
3
One of the launched experiments began to attract traction from the beginning. Ilkka Lipsanen
the Managing Director of the new business unit working under their own brand called Even
Better Accounting Co., developed a working formula to answer to ever more demanding
customer needs of the accounting sector. He had a vision to create the best imaginable
accounting service that would consist of highly automated processes and close collaboration
with the customer to understand their needs better and offer unparalleled value by addressing
the exact needs of each customer.
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 3
4
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 4
5
A start-up within the corporation model has given the freedom to choose all needed
information systems from the scratch. That is why Even Better Accounting Co. has chosen to
use only agile systems that aren’t ponderous to use. The staff is highly trained and every staff
member is considered to be a true professional – they have been given the freedom to make
their own decisions in working methods, ways to serve their customers and how to
communicate with them, with an objective of excellence in customer intimacy and quality of
work.
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 5
6
The 10-person team of the company has been arranged to work in pairs with customers, one person
mainly responsible for the bookkeeping and one person acting as an experienced account manager with
an ability to provide valuable information of the customers financial situation. There are no clear
responsibility areas though, the bookkeeping responsible might do some of the communication to
customer and the account manager does also bookkeeping. The aim of the model is to create an efficient
and flexible way of working by utilizing each person’s individual core talents without sacrificing the intimacy
of the customer relationship. That is something what customers really highly value – they want to be
familiar with the person responsible for providing their financial information. This model also creates the
possibility to add value for the customer with a consultative approach, since the experienced partner can
create insight in the form of financial analysis.
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 6
7
EBAC is using the latest and most efficient accounting systems available. A semi-automated online-
based accounting system does some parts of the work that have traditionally been done by low-skilled
employees. This means that the bookkeeping process has been designed with a principle to eliminate
unnecessary work from the accounting point-of-view. An ERP-system is used to control the workload.
Every customer has their specific needs for monthly and yearly occurring tasks, so an automated system
for task management is crucial. Also, the ERP has a function for task-specific time tracking, so working
time can be allocated to the right task and customer, and invoiced straight from the ERP.
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 7
8
The business model of the company is different compared to the industry. Current industry standard is
to invoice the customer based on how many hours the bookkeeper has done work to the customer. This
gives no incentive for process improvement, or to eliminate waste from occurring on customer or
bookkeeper processes, since the extra time is fruitful in economic sense. EBAC has a different approach
to business model. They offer a fixed fee based on an estimation of monthly workload, performed during
the sales process. The fixed fee is formulated by approximating the monthly workload in hours and
multiplying it with the industry standard 65 euros.
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 8
9
Some discount may be given sometimes to close a deal, but mainly the estimation is based on the
customers historical records of accounting needs and the two key account managers intuition. If the
customer causes some workload for EBAC that is not included in the contract, that work is then invoiced
on top of the fixed fee by the hourly rate of 65 euros.
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 9
10
The fundamental competitive advantage that Ilkka
Lipsanen has created is that EBAC wants to improve the
quality of the customer relationship. In the beginning
more costs will appear than has been budgeted to the
fixed-fee, but those costs are carried by EBAC. As the
relationship with the customer progresses and the
customer accustoms to EBACs process of accounting,
the costs will decrease and EBAC and the customer will
begin to profit from the relationship, in the form of less
time spent on routines and lower overall costs.
European Students of Industrial Engineering and Management
www.estiem.org
Case background – 10
11
The experiment has been a successful, as market interest has been high. The market clearly shows a
need for this kind of service as demand has grown rapidly. Now management faces a problem in how
to make sure that the current high level of quality can be sustained as the service is scaled. All kinds of
ways to increase the generated customer value and increase the efficiency of the project are
considered vital for business success. Also, some reinforcement and insight is needed of the earning logic
functioning: how are the customer relationships developing and are the fixed fee approximations
correct? Some customer-specific factors have been identified, so their relationship with the pricing
process should be studied.
European Students of Industrial Engineering and Management
www.estiem.org
Task for the analyst
12
Ilkka Lipsanen wants you to tackle the situation from two directions,
firstly, to study the data provided by the ERP system and
secondly, to consider the accounting process requirements and its nature, and find
possible ways to increase the processes performance.
Download data from: https://tinyurl.com/gbaccounting
European Students of Industrial Engineering and Management
www.estiem.org
On average the firm is making profit
13
9918927936945954963972981991001
5
4
3
2
1
0
-1
Observation
Projectedworkload/actualworkload
_
X=1.388
1 = break-even
1
1
1
1
1
1
111
111
1
1
11
1
1
1
11
I Chart of profitability of individual account per month
• This measure is calculated by dividing
the estimated workload of an account
by the actual workload
• Value 1 means that the estimate
has been the same as actual
workload
• 1 hour to be billed from the
customer based on the
contract
• There are a lot of values below 1
• Where should we focus on?
European Students of Industrial Engineering and Management
www.estiem.org
SIPOC
14
Manual
booking
Automated
booking
Reconciliation
BK material
acceptance
More
information
from client
Tax return
Closing of
accounts
Bookkeeping
material
Accepted
bookkeeping
material
Book-
keeping
inspection
Supplier Input Process Output
CUSTOMER
Card payments
Bank transfers
Payrolll
Sales invoice
Purchase invoice
Card payments
Card payments
System
Generated
Material
OK
Financial
statement
Fiscal
declaration
Monthly tax
return
Monthly bookkeepingCustomer
Customer
Customer
Customer
Subcontractor
European Students of Industrial Engineering and Management
www.estiem.org
Quality of the customer:
Human factors, is the customer someone who gets
things done, or someone who doesn’t care about little
details and do his/her tasks regarding accounting
Causes most of the defects!!
Most common customer problems:
-Doesn’t deliver the raw material needed for accounting
(receipts, papers, forms, government bureaucracy)
-Doesn’t comply with regulations and rules (uses
company credit card to pay for personal expense)
-Sometimes even breaks the law
-Sometimes customer doesn’t know
Something is forgotten due to a lot of small detailed
work.
->Currently this is being addressed with a calendar in the
ERP that has every possible task assigned to individual
workers, and a Kanban board for the bigger yearly tasks,
and process guidelines and instructions
Features of accounting business
15
Malfunctions in systems (Own, third party and
government)
->time tracking issues (timer not on)
Malfunctions in tools
Human error (deleted files, errors in bookkeeping,
insufficient resources and too much work for one person.
Recruiting ongoing, but cultural fit and good people are hard
to find)
Different ways of working (standardization is
encouraged, but in a small company processes can’t be too
regulated, maturity level of substance and processes are still
developing, continuous improvement is encouraged)
European Students of Industrial Engineering and Management
www.estiem.org
• Apply LSS tools form two perspectives:
• Educate staff in Lean methods by talking about waste, flow and value
• Analyze the customer base with LSS tools to find out unprofitable customers
and the best customer types
Recommendations based on the real project:
16
European Students of Industrial Engineering and Management
www.estiem.org
• Define what is a process. This is probably not clear to anyone.
• Define where the customer perceived value comes from! Also probably not clear to
everyone, and lots of time is wasted when the worker thinks he is doing
productive work, but truly is not. For example trying to make perfect bookkeeping
doesn’t create value to any stakeholder. That’s a good example of over processing!!
Bookkeeping quality should be just good enough to please all stakeholder, and not
any better. If everything should be perfect, the worker has to sacrifice a lot of time
and probably still cannot create perfect bookkeeping.
Lean methods in use at a service based
business – 1
17
European Students of Industrial Engineering and Management
www.estiem.org
• Define waste types. Workers are professionals, but in their own agenda. If they are
given the tools to improve the process, they definitely can apply them.
• Flow is not that crucial in accounting, since the deadlines come in most cases from
legislation. It is important to understand the concept of minimizing WIP to
maximize productivity.
• 5S, especially standardize.
• Kanban and other control applications should be applied where possible
• 5 Why’s
• Continual improvement
Lean methods in use at a service based
business – 2
18
European Students of Industrial Engineering and Management
www.estiem.org
Details of the materials
https://creativecommons.org/licenses/by-nc/4.0/legalcode
Contact leansixsigma@estiem.org
for commercial usage of the materials
This case has been created based on a real-world project conducted by a student, who
has taken the course and been an instructor in the course
Materials of the trainings have been created based on the materials provided by
ESTIEM Summer Academy Professor Gregory H. Watson

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ESTIEM Lean Six Sigma Green Belt Accounting Case

  • 1. European Students of Industrial Engineering and Management www.estiem.org ESTIEM LSS Green Belt Case 1 Increasing profitability of standard accounting customers The Friendly Accounting Co.
  • 2. European Students of Industrial Engineering and Management www.estiem.org Case background – 1 2 The Friendly Accounting Co. is a traditional and conservative accounting company with long traditions from the 1950’s. With branches all around Finland, it has been a dominant player in the industry for quite a long time. The Friendly Accounting Co. has been profitable from the beginning of its foundation, but recent advancements in technology have taken a toll to TFAC. It has begun to lose its grip on customers due to better digital services available and rapid advancement of small nimble players, who have the ability to adapt to customer needs faster. That is why Juhani Sysimetsä, the CEO of TFAC, made a decision in 2014 to launch a round of experiments to create a new kind of service model to keep up with competition.
  • 3. European Students of Industrial Engineering and Management www.estiem.org Case background – 2 3 One of the launched experiments began to attract traction from the beginning. Ilkka Lipsanen the Managing Director of the new business unit working under their own brand called Even Better Accounting Co., developed a working formula to answer to ever more demanding customer needs of the accounting sector. He had a vision to create the best imaginable accounting service that would consist of highly automated processes and close collaboration with the customer to understand their needs better and offer unparalleled value by addressing the exact needs of each customer.
  • 4. European Students of Industrial Engineering and Management www.estiem.org Case background – 3 4
  • 5. European Students of Industrial Engineering and Management www.estiem.org Case background – 4 5 A start-up within the corporation model has given the freedom to choose all needed information systems from the scratch. That is why Even Better Accounting Co. has chosen to use only agile systems that aren’t ponderous to use. The staff is highly trained and every staff member is considered to be a true professional – they have been given the freedom to make their own decisions in working methods, ways to serve their customers and how to communicate with them, with an objective of excellence in customer intimacy and quality of work.
  • 6. European Students of Industrial Engineering and Management www.estiem.org Case background – 5 6 The 10-person team of the company has been arranged to work in pairs with customers, one person mainly responsible for the bookkeeping and one person acting as an experienced account manager with an ability to provide valuable information of the customers financial situation. There are no clear responsibility areas though, the bookkeeping responsible might do some of the communication to customer and the account manager does also bookkeeping. The aim of the model is to create an efficient and flexible way of working by utilizing each person’s individual core talents without sacrificing the intimacy of the customer relationship. That is something what customers really highly value – they want to be familiar with the person responsible for providing their financial information. This model also creates the possibility to add value for the customer with a consultative approach, since the experienced partner can create insight in the form of financial analysis.
  • 7. European Students of Industrial Engineering and Management www.estiem.org Case background – 6 7 EBAC is using the latest and most efficient accounting systems available. A semi-automated online- based accounting system does some parts of the work that have traditionally been done by low-skilled employees. This means that the bookkeeping process has been designed with a principle to eliminate unnecessary work from the accounting point-of-view. An ERP-system is used to control the workload. Every customer has their specific needs for monthly and yearly occurring tasks, so an automated system for task management is crucial. Also, the ERP has a function for task-specific time tracking, so working time can be allocated to the right task and customer, and invoiced straight from the ERP.
  • 8. European Students of Industrial Engineering and Management www.estiem.org Case background – 7 8 The business model of the company is different compared to the industry. Current industry standard is to invoice the customer based on how many hours the bookkeeper has done work to the customer. This gives no incentive for process improvement, or to eliminate waste from occurring on customer or bookkeeper processes, since the extra time is fruitful in economic sense. EBAC has a different approach to business model. They offer a fixed fee based on an estimation of monthly workload, performed during the sales process. The fixed fee is formulated by approximating the monthly workload in hours and multiplying it with the industry standard 65 euros.
  • 9. European Students of Industrial Engineering and Management www.estiem.org Case background – 8 9 Some discount may be given sometimes to close a deal, but mainly the estimation is based on the customers historical records of accounting needs and the two key account managers intuition. If the customer causes some workload for EBAC that is not included in the contract, that work is then invoiced on top of the fixed fee by the hourly rate of 65 euros.
  • 10. European Students of Industrial Engineering and Management www.estiem.org Case background – 9 10 The fundamental competitive advantage that Ilkka Lipsanen has created is that EBAC wants to improve the quality of the customer relationship. In the beginning more costs will appear than has been budgeted to the fixed-fee, but those costs are carried by EBAC. As the relationship with the customer progresses and the customer accustoms to EBACs process of accounting, the costs will decrease and EBAC and the customer will begin to profit from the relationship, in the form of less time spent on routines and lower overall costs.
  • 11. European Students of Industrial Engineering and Management www.estiem.org Case background – 10 11 The experiment has been a successful, as market interest has been high. The market clearly shows a need for this kind of service as demand has grown rapidly. Now management faces a problem in how to make sure that the current high level of quality can be sustained as the service is scaled. All kinds of ways to increase the generated customer value and increase the efficiency of the project are considered vital for business success. Also, some reinforcement and insight is needed of the earning logic functioning: how are the customer relationships developing and are the fixed fee approximations correct? Some customer-specific factors have been identified, so their relationship with the pricing process should be studied.
  • 12. European Students of Industrial Engineering and Management www.estiem.org Task for the analyst 12 Ilkka Lipsanen wants you to tackle the situation from two directions, firstly, to study the data provided by the ERP system and secondly, to consider the accounting process requirements and its nature, and find possible ways to increase the processes performance. Download data from: https://tinyurl.com/gbaccounting
  • 13. European Students of Industrial Engineering and Management www.estiem.org On average the firm is making profit 13 9918927936945954963972981991001 5 4 3 2 1 0 -1 Observation Projectedworkload/actualworkload _ X=1.388 1 = break-even 1 1 1 1 1 1 111 111 1 1 11 1 1 1 11 I Chart of profitability of individual account per month • This measure is calculated by dividing the estimated workload of an account by the actual workload • Value 1 means that the estimate has been the same as actual workload • 1 hour to be billed from the customer based on the contract • There are a lot of values below 1 • Where should we focus on?
  • 14. European Students of Industrial Engineering and Management www.estiem.org SIPOC 14 Manual booking Automated booking Reconciliation BK material acceptance More information from client Tax return Closing of accounts Bookkeeping material Accepted bookkeeping material Book- keeping inspection Supplier Input Process Output CUSTOMER Card payments Bank transfers Payrolll Sales invoice Purchase invoice Card payments Card payments System Generated Material OK Financial statement Fiscal declaration Monthly tax return Monthly bookkeepingCustomer Customer Customer Customer Subcontractor
  • 15. European Students of Industrial Engineering and Management www.estiem.org Quality of the customer: Human factors, is the customer someone who gets things done, or someone who doesn’t care about little details and do his/her tasks regarding accounting Causes most of the defects!! Most common customer problems: -Doesn’t deliver the raw material needed for accounting (receipts, papers, forms, government bureaucracy) -Doesn’t comply with regulations and rules (uses company credit card to pay for personal expense) -Sometimes even breaks the law -Sometimes customer doesn’t know Something is forgotten due to a lot of small detailed work. ->Currently this is being addressed with a calendar in the ERP that has every possible task assigned to individual workers, and a Kanban board for the bigger yearly tasks, and process guidelines and instructions Features of accounting business 15 Malfunctions in systems (Own, third party and government) ->time tracking issues (timer not on) Malfunctions in tools Human error (deleted files, errors in bookkeeping, insufficient resources and too much work for one person. Recruiting ongoing, but cultural fit and good people are hard to find) Different ways of working (standardization is encouraged, but in a small company processes can’t be too regulated, maturity level of substance and processes are still developing, continuous improvement is encouraged)
  • 16. European Students of Industrial Engineering and Management www.estiem.org • Apply LSS tools form two perspectives: • Educate staff in Lean methods by talking about waste, flow and value • Analyze the customer base with LSS tools to find out unprofitable customers and the best customer types Recommendations based on the real project: 16
  • 17. European Students of Industrial Engineering and Management www.estiem.org • Define what is a process. This is probably not clear to anyone. • Define where the customer perceived value comes from! Also probably not clear to everyone, and lots of time is wasted when the worker thinks he is doing productive work, but truly is not. For example trying to make perfect bookkeeping doesn’t create value to any stakeholder. That’s a good example of over processing!! Bookkeeping quality should be just good enough to please all stakeholder, and not any better. If everything should be perfect, the worker has to sacrifice a lot of time and probably still cannot create perfect bookkeeping. Lean methods in use at a service based business – 1 17
  • 18. European Students of Industrial Engineering and Management www.estiem.org • Define waste types. Workers are professionals, but in their own agenda. If they are given the tools to improve the process, they definitely can apply them. • Flow is not that crucial in accounting, since the deadlines come in most cases from legislation. It is important to understand the concept of minimizing WIP to maximize productivity. • 5S, especially standardize. • Kanban and other control applications should be applied where possible • 5 Why’s • Continual improvement Lean methods in use at a service based business – 2 18
  • 19. European Students of Industrial Engineering and Management www.estiem.org Details of the materials https://creativecommons.org/licenses/by-nc/4.0/legalcode Contact leansixsigma@estiem.org for commercial usage of the materials This case has been created based on a real-world project conducted by a student, who has taken the course and been an instructor in the course Materials of the trainings have been created based on the materials provided by ESTIEM Summer Academy Professor Gregory H. Watson