Kaizen for Accounts Payable (Part 1)

Kaizen is the Japanese philosophy that focuses upon continuous improvement, seeking to achieve changes in processes in order to enhance efficiency and quality. Kaizen can be roughly translated from Japanese to mean “change for the good”. The concept of Kaizen encompasses a wide range of ideas: it involves making the work environment more effective by creating a team atmosphere, improving everyday procedures, ensuring employee satisfaction and making the job more fulfilling and less tiring.

Today Kaizen is recognized worldwide as an important pillar of an organization’s long-term competitive strategy. A lot of big and small companies across the world have adopted the Kaizen principles for doing business and running departments. In our blog we’ll examine this idea in the context of accounts payable issues.

To better understand the idea of Kaizen, we used our chance to ask Tsuneaki Sugata, Production Control Manager of Nissan Motor Company, to briefly tell us about the concept. Fortunately, Sugata-san kindly agreed to provide his assistance:

“Kaizen incorporates activities aimed at improving company major key performance indicators like cost, lead time and quality. It covers both shop floor and office works. Kaizen was performed first in Nissan more than 30 years ago. Later Nissan incorporated its common principle and procedures in the system called Nissan Production Way, like Toyota did with Toyota Production System. Kaizen is an accumulation of little improvements to result in big improvement. If you think about improvement every day, you will hit upon great ideas.

Kaizen is mainly performed in the manufacturing field, but some consultants may recommend introducing it to other industrial fields. Not all companies in Japan follow Kaizen ideas. For example, traditional, family-managed companies do not like to make changes by Kaizen, because it may happen to be a challenge to a good old tradition. Kaizen can be used even in separate departments, but it’s very important to choose a right Kaizen leader, who should be a company management representative to be able to control staff. Workers play a great role in the concept of Kaizen: they should propose their ideas on improvements to the leader, the leader will decide whether to accept an idea or not, and deploy it until it generates the effect.

In my professional life I carefully watch how the staffs around me work and talk over them how to improve the process. I also use some tools for visualizing the current status and understanding how to improve it.”

Tsuneaki Sugata
Production Control Manager, Nissan Motor Company

5S Concept

The 5S is a program aimed at systematical achievement of total organization, cleanliness, and standardization in the workplace. The 5S is an integral part of Kaizen and an instrument in making it a success. It contains rules and recommendations that will help employees to achieve little improvements leading to constant perfection. Let us look closer at the 5S components and how they can help in the accounts payable department:

Seiri (Sort out)
In the simplest office terms Seiri means sorting out critical, necessary, frequently used items, as well as getting rid of useless and unneeded ones. Sorting out papers (invoices, reports) on your desktop, books and folders on shelves, or properly organizing accounts payable electronic information will help you always find any document easily and fast.

Also Seiri may refer to sorting and organizing things requiring enhancement and those taking you off your efficient working. Analyzing and improving useful and useless items will contribute to your better work performance and self-organization. The “Sort out” may also mean to stop doing others’ work and overworking. Every accounting specialist must know their duties and responsibilities to focus on them without distracting attention from essential things to other workers’ responsibility zone.

Seiton (Organize)
In the context of office work organization Seiton means that each item must have its own fixed place and should be placed back after every usage. Keeping things in order plays an important role in the efficient use of items, which will contribute to time saving. Paper to electronic invoice conversion ensures archiving and operating document storage, enterprise content structuring, access right distribution and many more other ECM system functions that can be considered perfect in the context of Kaizen.

Also, Seiton means organizing the working process itself, putting actions in a certain order. Most essential works must be scheduled at high productivity time. Sticking to a working plan will help you increase accounts payable efficiency through paying attention to important things and being accurate when working with sums and requisitions. Automated invoice approval shows that the ECM platform comprising workflow functions is a great tool for recurrent business processes regulation.

Seiso (Clean)
At the end of each working day you should not only clean up your table, but also establish order in your head. Render several minutes for summing up the results of the day and making notes. Then forget about the job! Such practice can help you constantly improve not only your working process, but yourself.

In the context of the whole accounts payable department efficiency automated invoice processing allows monitoring time expenditure and other important parameters. KPI tools can be useful not only for management, but for employees also helping them find and close critical gaps.

Seiketsu (Standardize)
Build the system out of the 3 steps mentioned above. Start your working day with the system and very soon you’ll see the results. Standardization also implies all kinds of automation, including human automated actions and machine automation.

You can make a rule of doing accounting operations in specific successions, and later you’ll do it automatically. Automated invoice processing with the help of special software is always welcome in accounts payable departments, as it facilitates and streamlines the overall working process.

Shitsuke (Discipline)
Keep to your planned course and don’t get back to old habits and methods. Discipline is required in many spheres of professional life from timely coming to work to submitting financial reports. Try never to be late, do things properly and in time.

In terms of quality Shitsuke refers to the idea that quality must be embedded into the working process itself. There is no need to make constant accounting audits, which will just complicate everything and make workers angry. Quality must be built originally in workers’ attitude to their responsibilities. Every accounts payable specialist must understand their responsibility zones and feel the importance of their work for the company’s or department’s performance indicators.

 

Now you know the main Kaizen rules and recommendations aimed at constant perfection through making little improvements. You can use them in your accounts payable department and dramatically increase its efficiency. In our next blogpost we’ll discuss different types of waste hampering efficient performance of accounts payable departments, and tell you how Kaizen principles can help prevent occurrence of such waste.

 

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