Whether you are already focusing on lean innovation or are getting started with research, you have probably heard of the 5 principles of lean we are about to discuss. In this post we will be talking about how these key principles work in lean accounting and how accounts receivable software aligns with your lean accounting goals.
These 5 Principles of lean are a set of guide points for establishing a lean strategy to increase profitability by increasing value to customers. They include:
- Value – Identifying what value is to your client base, identifying pain points and creating solutions. Requires at least some market research.
- Value Stream – Identifying the processes and tasks necessary to deliver the value discussed above and removing as many unnecessary tasks as possible when they don't contribute to that value stream.
- Flow – Enabling critical tasks and processes in the value stream to run as smoothly as possible by reducing inefficiencies and redundancies.
- Pull – Adopting a pull-based inventory system to reduce inventory overhead and inefficiency.
- Perfection – Perfection is the unachievable goal of lean and it is a practice of constant improvement. Requires reporting and tracking of key performance indicators.
In lean accounting, the accounting department treats the organization as a customer. The goal is delivering more value to the organization and its lean manufacturing goals. Let's take a look at how AR software aligns with lean principles to support lean accounting.
How AR Automation Aligns with 5 Principles of Lean
If your customers purchase your goods or services on credit, a great way to support your company's lean efforts is implementing a powerful accounts receivable automation solution.
- Identify Value - Customer bill pay experience may be a key area to deliver more value to your customer and the right AR software will help track and improve this process
- Value stream – The right AR automation solution will provide a customer payment portal, payment method options, auto pay and other convenience features to reduce inefficiencies and improve your customers' bill pay experience.
- Flow – One of the key advantages of AR automation is reducing inefficiencies in your billing department. Automation leaves your accounting department more time to focus on delivering innovation and supporting flow through reporting.
- Pull – The efficiency gains, tracking and tighter management of billing and collections delivered by the AR solution make it easier and less risky to manage a pull-based system. To learn more about functionality you should expect to find in an AR automation solution, check out these Seven key receivables automation functions
- Perfection – The KPI tracking and reporting features in your receivables management solution will help you in your efforts for constant improvement. Aged receivables and other reports help you improve cash flow, and cash flow is critical to lean success. Learn more about AR and cashflow
Accounts receivable automation is key to streamlining your billing efficiency and impacts your ability to issue credit and your ability to keep selling on credit.