CFO Playbook: Applying value stream mapping to financial processes

As economic volatility intensifies amidst the confluence of geopolitical turmoil, supply chain disruption and inflationary headwinds, CFOs require greater operational visibility to guide strategic decisions.

Value stream mapping offers a powerful yet underutilised technique for achieving this.

By mapping processes from raw data to actionable insights, waste is uncovered and efficiencies identified. Rather than bloom in complexity and ambiguity, finance teams can drive productivity and add value.

What is value stream mapping?

Value stream mapping is a visual representation tool used in lean methodology to analyze the complete flow of materials and information required to transform raw components or data into a final product or insight delivered to the end customer. The mapping technique uses flowchart-style diagrams to illustrate each step in the process from start to finish.

These process step diagrams capture vital information including cycle times, quality levels, required approvals, inventory counts held at various stages, and both value-adding and non-value-adding activities. Value-adding steps change the product or service in ways that actively improve it for the eventual customer. Non-value effort includes waiting periods, unnecessary movement of materials or data between teams, duplication of effort, and quality defects requiring rework.

Once all process steps are mapped sequentially and the key metrics and components are highlighted, the current state analysis illuminates a factual baseline of how value flows through the system, while also pinpointing where delays, waste, and obstacles exist. This data-backed visibility then informs potent future state analysis which identifies targeted process changes to remove inefficiencies and speed up value delivery.

Where VSM applies and its benefits?

For CFOs, numerous accounting, planning and reporting workflows can benefit from value stream mapping analysis. Workflows like budget preparation, internal controls, system interoperability, procure-to-pay cycles and invoice processing tend to accumulate extensive hidden waste over time.

Legacy budgeting workflows, for example, often involve cumbersome back-and-forth communications, fragmented data consolidation across misaligned spreadsheets and over processing of redundant data points. Mapping these broken budget assembly lines illuminates opportunities to automate integrations, standardise templates and focus efforts on value-adding analysis over manual number crunching.

Likewise, the spiderweb of internal financial controls instituted over the years creates drag through unnecessary waiting points. Streamlining approval chains, eliminating redundant checks and judiciously automating controls where feasible helps unlock working capital bottlenecks.

On the system side, despite significant investments in ERP, CRM and BI platforms, many process gaps still require tedious human intervention. Mapping data flows highlights integration pain points ripe for workflow automation.

Transactional areas including procure-to-pay and invoices also suffer from overprocessing. Invoice handling alone often triggers a maze-like journey accruing late fees while quality issues multiply. Mapping and optimizing response flows minimizes business costs.

By routing out resource-draining rework, complexity and informational logjams, streamlined finance operations not only require fewer dollars to execute but also multiply productivity gains by enabling staff to focus on value acceleration over administration. The benefits cascade across the organization – from reliable forecasts to accelerate decision velocity when growth opportunities arise.

How to implement?

For finance teams and CFOs new to lean process mapping techniques, the journey begins by developing foundational knowledge. Numerous training resources exist to educate on value stream mapping fundamentals.

Connecting with internal champions of other lean methodologies can provide insights into getting started. And engaging external experts in lean transformation can shortcut the learning curve.

Once foundational knowledge is established, an initial analysis priority is selecting the right process for an inaugural pilot. Prime candidates are typically transactional workflows like procure-to-pay, invoice processing or budget workflow assembly that lack process transparency. Also ideal are processes with clear pain points signalled by complaints around speed, accuracy or fragmented systems.

The next step is mapping the as-is workflow from end to end. Cross-functional input ensures all facets are documented. Crucially, key metrics must be captured for each process step including:

• Cycle time
• Decision bottlenecks
• Information waits
• Quality error rates
• Inventory volumes
• Rework loops
• Value vs non-value-add time

Visual diagramming software helps illustrate the bird’s eye view of the workflow while quantifying obstacles. This analytical baseline then informs creation of an optimised future state process leveraging earth mover’s distance to identify high impact changes balanced against implementation feasibility.

The final phase activates the refined workflow for a fixed pilot period with metrics continuing to guide iterative improvements towards efficiency, quality and speed targets. With fact-based transparency into bottlenecks, the path towards continuous future refinement reveals itself over time by simply following the data signals. The success of initial pilots builds internal buy-in spurring expansion across other finance processes.

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