Gain Efficiency in Your Firm Using Lean Six Sigma
Find the time to focus on the services clients want the most

By Dustin Hostetler, Lean Six Sigma Master Black Belt

Reprinted with permission from Voices, an Ohio Society of CPAs publication, December 2009

Lean Six Sigma, which began in the manufacturing industry, is a business management strategy that works to improve the quality of end-products. By identifying and removing the causes of defects and variability in manufacturing and business processes, efficiency is gained. This team-based problemsolving approach is led by skilled facilitators (certified Black Belts) who bring a set of tools that are uniquely applied to each process and situation. Starting with a thorough measurement and analysis of all the current steps in the process, the team identifies where efficiencies are being lost and uses Lean techniques to improve those processes.

A recent survey by the Institute of Management & Administration asked clients why they leave their CPA firms. The number one response was poor client service, and the third highest response was that the firm was not being proactive. Lean Six Sigma helps address both concerns by helping firms become more efficient in providing client services and finding more time for the strategic, proactive services clients want.

The more effectively a firm gets work in the office so it can be completed and delivered, the more quickly that work can be billed – leading to increased cash receipts. Finding more time is at the heart of Lean Six Sigma, especially when applied to professional services such as accounting.

Who doesn’t want to have more time? Here is how Lean Six Sigma can help you achieve it.

Applying Lean Six Sigma to Professional Services
In order to become a certified Black Belt, students must complete a real-life Lean Six Sigma project. In determining a project to tackle, some partners at Rea & Associates mentioned that there were areas in the tax return process that could be improved. While there was no precedent for using Lean in a professional services setting, the model can be applied to any industry.

The first ever Lean Six Sigma project done in a CPA firm looked at the business tax return process in one of Rea’s local offices. The success of that project led to additional process improvement projects – initially at the local office level and, within the past two years, firm-wide projects. The firm’s most recent project that looked at business tax returns on a firm-wide basis resulted in an increase of cash receipts by 10 percent over the previous year.

Meeting Economic Demands
Finding ways to make your services more efficient makes sense anytime, but in today’s economic conditions, it’s more important than ever. As clients reduce the scope of services and firms are being asked to cut fees, accounting firms must find ways to remain profitable. That means controlling costs as well as the methods to do so. Successful firms will be the ones that focus on the one metric that matters above all – delivering superior client service.

To borrow an analogy from football, a team that spends all of its time practicing the fundamentals of blocking and tackling never gets to concentrate on an overall game plan and strategy. The team that has the fundamentals in place and can spend its practice time more effectively wins. The same thing happens in an accounting firm. Those firms that spend all of their time trying to get the compliance services (i.e., the fundamentals) under control do not have time to be proactive and add value to client relationships.

Increasing Your Firm’s Efficiency
Firms often look to one another to define best practices that can improve their own performance. However, the term "best practices" implies a one size fits all philosophy, which isn’t true.

In Lean Six Sigma it’s important to remember that each firm is unique – no two firms have the same personnel, procedures, culture or experience. What works at a 500-person, $80 million firm will not necessarily work at 50-person, $8 million firm. These two firms have very different needs, and although the concepts might be similar, the implementation may be very different. Therefore it is more important to develop consistency than standardization as new processes are established.

The following are some general tips that can help your firm reach greater efficiency and effectiveness using Lean Six Sigma.

• Developing Processes Organically. This is your team’s process, not a process brought in from an outside source. Having your team identify and improve the process is key because you need everyone’s buy-in for the new process to succeed. The staff at Rea documents the process of requesting and receiving client data and preparing, reviewing, processing and delivering a business tax return. Together, everyone works to improve each part of the process. This is about what’s best for your firm – no one else’s.

• Managing the Front Door. Managing the front door means avoiding the inefficient collection of information coming into the office. A manufacturer would never produce an order that includes only half the specifications and raw materials. Your firm should operate the same way. At Rea, client-specific, customized checklists were developed using terminology familiar to the client, and employees were empowered to screen the information needed. As a result, the firm greatly reduced the time spent starting and stopping work due to incomplete or incorrect data.

• Controlling Preparer and Reviewer Consistency. Efficiency can be gained in the tax preparation and review processes. Although you don’t want to stifle professional judgment or creativity, there are ways to manage consistency in how individuals perform within the firm. For example, are each of your reviewers consistent in what they expect the tax return to look like? Odds are there are all kinds of inconsistencies and personal preferences – and every inconsistency contributes to lost efficiency and lost opportunity to do something value-added for the client.

• Busting the Bottlenecks. Just as bottlenecks block traffic on a freeway onramp, your workflow can slow to a crawl due to ineffective processes, and you probably already know where some bottlenecks exist. To ease bottlenecks at Rea, tax returns were placed in a work pool where several staff members could share the task as they had time, rather than all being funneled to one person for the next task. In addition, a triage system was established to categorize work levels, and tax returns and reviews were assigned to staff members based on experience. This led to greater throughput, or production over time, and more capacity to complete other work. Lastly, setting time goals for both the review function and clearing of review notes lead to reduced turnaround time and greater flow.

Focusing on Value-Add Services
Doing more with less isn’t just a slogan any more. It’s the new normal. Lean Six Sigma helped Rea & Associates reduce charge hours by 7.5 percent and increase realization by 6 percent – while still maintaining revenue levels in a down economy. The reduction in charge hours translated to more than 100 hours of additional capacity per individual per year. By looking at the processes, Rea found more time to develop strategies and game plans to better help clients and to tackle fundamental services more efficiently.

Now that’s a winning playbook!

Dustin Hostetler is a certified Lean Six Sigma Master Black Belt with Lean CPA, LLC, a division of Rea & Associates, Inc. He can be reached at (330) 264-0791 or dustin.hostetler@reacpa.com. For more information about Lean CPA, please visit www.LeanCPA.net.