The tension was broken by asking customers what they thought. It turned out that they understood perfectly well that the company wanted its money — and were often even grateful to the accounting department for unearthing process problems on their end that delayed payment. When customers were asked about their key criteria for selecting a manufacturing company, the handling of delinquent accounts was never mentioned. The sales department’s long-standing concern about losing customers was entirely misplaced.
In the end, the two departments agreed that accounting should provide service for all customers and have the responsibility for the outstanding accounts of most of them. The sales department assumed responsibility for the very few key accounts remaining and agreed to conduct regular reviews of key accounts with the accountants to re-sort the lists.
Better communication between the departments also helped the manufacturing company to reduce the number of reports it produced. The company had observed that once an executive requested a report, it would proceed through production, without any critical assessment of its usefulness. Cutting back on the number of reports posed a challenge, since their sponsors regularly claimed that they were necessary. In response, finance analysts found it effective to talk with a report’s sponsor about just how it would serve the needs of end users and to press for concrete examples of the last time such data were used. Some reports survived; others were curtailed. But often, the outcome was to discontinue reports altogether.
Exploiting chain reactions. The value of introducing a more efficiency-focused mind-set isn’t always evident from just one step in the process — in fact, the payoff from a single step may be rather disappointing. The real power is cumulative, for a single initiative frequently exposes deeper problems that, once addressed, lead to a more comprehensive solution.
At another manufacturing company, for example, the accounting department followed one small initiative with others that ultimately generated cost savings of 60 percent. This department had entered the expenses for a foreign subsidiary’s transportation services under the heading “other indirect costs” and then applied the daily exchange rate to translate these figures into euros. This approach created two problems. First, the parent company’s consolidation program broke down transportation costs individually, but the subsidiary’s costs were buried in a single generic line item, so detail was lost. Also, the consolidation software used an average monthly exchange rate to translate foreign currencies, so even if the data had been available, the numbers wouldn’t have matched those at the subsidiary.
Resolving those specific problems for just a single subsidiary would have been an improvement. But this initiative also revealed that almost all line items were plagued by issues, which created substantial waste when controllers later tried to analyze the company’s performance and to reconcile the numbers. The effort’s real power became clear as the company implemented a combination of later initiatives — which included standardizing the chart of accounts, setting clear principles for the treatment of currencies, and establishing governance systems — to ensure that the changes would last. The company also readjusted its IT systems, which turned out to be the easiest step to implement.