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Six Sigma and Accounting

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  • #29714

    Sorour
    Participant

    I’m looking for any research and/or practical applications of Six Sigma to Accounting.  Specifically, I’m curious to see if anyone has tried to “redesign” accounting and reporting processes to better fit a Six Sigma framework. Activity Based Costing is in the right ballpark – but not quite what I’m after.  Anyone know if there’s any good thought leadership on this one?  Thanks
    Paul
     

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    #76643

    Mike Carnell
    Participant

    Paul,
    I would start by reading a book called “Relevance Lost.”
    There are two issues I believe are critical to accounting as defined by its customers. Timeliness and accuracy (no defects).
    Motorola has done a lot to go from a very long monthly, quarterly and year end close process to a virtually On demand close. I would try to determine if you are putting out the close reports in a timely enough manner that your internal customers see them as useful. If not shoeten it.
    The emotional issue is accuracy, not in and of itself but accounting seems to have this love affair witha thing called a trial balance. This is the emotional part. The trial balance is using your customers to perform visual inspection on your product after which you rework it so that you can produce a defect free product. The things you fix after the trial balance are defects. Whether they are the result of accounting receiving poor information or someone making a wrong journal entry – blame is not the issue. Fixing it is.
    Good luck.

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    #76645

    Sambuddha
    Member

    Paul,
    I bought the book “Relevance Lost” on Mike’s recommendation. And I am glad I did.It is a historical account and has insightful analysis interjected into the narrative.
    It will help demonstrate that many of the current (the book was written in the 80’s, yet, I know it still holds true) management/cost accounting systems are archaic and do not cater to the needs of the manager and for that matter improvement programs.
    Interesting read.
    Best,
    Sambuddha
     

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    #76651

    Annonymous
    Participant

    Gee – I just asked a closely related question at the tail of an answer I posted on another thread “Six Sigma and Income Statements”.   What that question caused me to wonder was “Does anyone have any experience doing Measurement System Analysis on cost accounting systems?”  And here, a little down the screen, is a referral to a resource from the reliably-useful-or-amusing-or-both Mike Carnell.  I’ll have to put in a request to the library for Relevance Lost. 
    I’d buy a copy, but it looks very much like I’ll be changing jobs in the near future.  So far, the end-point of the change is not known, so I’m being unusually careful about expending money out-of-pocket to indulge intellectual curiousity.  OTOH, once dis-associated form my current employer, I can post here under my own name, rather than using a pseudonym.

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    #76658

    Mike Carnell
    Participant

    Annonymous,
    Are we having a coming out party?

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    #76666

    Annonymous
    Participant

    Dear Mike –  While I wouldn’t use the phrase “coming out”, I do intend to participate in the forum under my own name, as soon as doing so doesn’t violate an employer policy.  Actually, I could use my name now, as long as I made no comments (including the employment relationship) about my employer, it’s products, policies, or practices.  And what fun is that?
    Since my current 2-up boss has declared me  (along with several other “specialists”) redundant, I have been looking elsewhere in the organization for a new position.  Nobody has headcount. So in a few weeks, it appears I will be free to share specific observations along with my identity. 

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    #76673

    JAD
    Participant

    Paul and Mike,
    I have put Relevance Lost on ‘to buy’ books.  Thanks.
    Prior to leaving my last employer, I worked with two regional profit and loss areas to directly roll-up the monthly financials.  It involved developing a new detailed reporting out of the man-hours and tracking of workflows, as well as, converting current measurements to six sigma-like metrics.  The last I had heard is that these practices were being leveraged and expanded at the division’s HQ level.  In addition, this division is also automating all of their major customer-type metrics and primary financials to the corporate level.
    I have not heard of any other company that is doing this actively.  Do you have any information on any other company doing something like this?
    By the way, the culture has definitely changed due to these changes – for the better!
    Cheers!
    Jim

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    #76676

    Mike Carnell
    Participant

    JAD,
    The best reference on your question has left consulting and is back in private industry. If you want to email your address I can give you his contact information. [email protected]

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    #158506

    Rod Monger
    Member

    I am not knowledgeable in Six Sigma but interested in how the methodology could be applied to accounting in the sense of using accounting data to identify areas for improvement within a company. I don’t think that’ what you are referring to — you are talking about Six Sigma as used on the accounting process itself. I guess what I am fumbling to ask is what is the overlap between Six Sigma and accounting?

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