DMAIC Project: Reducing Invoicing Lead Times
Baseline (Define)
This was to improve the billing process of an educational organisation. Before the project, the company's billing process was not under control. The average invoice turnaround time was 10.8 days and varied widely.
The target was set to have the training invoiced within 4 days of the date of the training. The aim of improving the invoicing process is to reduce the turnaround time for trade receivables and improve cash management.
Process performance at the beginning (Measure)
At baseline, the average billing lead time was 10.8 days and the standard deviation was 8.1 days. 73% were outside the specification limit (4 days), N = 106. The billing process had both mean and variance problems.
Based on the data, the biggest cause of the average billing problem was the biller. The average invoice lead time for invoice 1 was 7.6 and for invoice 2 was 12.6.
There were no significant differences between the averages for the type of customer and the type of billing.
Based on the data, the main source of variance was the nature of the training, i.e. whether it was open or organisation-specific. The standard deviation was 8.5 for open training and 5.8 for organisation-specific training.
There were no significant differences in standard deviations between biller and customer group.
Based on the data, it was found that, contrary to the preconception, the organisation being billed did not play a role in the mean and variance problems of the billing process.
Improvement measures (Analyze & Improve)
The solution was to define a new process by changing the roles, steps and timing.
Average problem: The roles and tasks of the invoicing staff were changed so that the invoicing is now done by Invoice 1 (previously Invoice 2 invoiced alongside other work, which did not seem to be a viable solution). Transferring all invoicing tasks from Invoice 2 to Invoice 1 and enabling Invoice 1 to invoice by giving him sufficient time to reorganise his other tasks.
Variance problem: A clear guide and basis for customers on the information needed for invoicing was established. The process was changed so that information on binding enrolments is received a week before the training, so that the collection and collation of participant data does not take place entirely after the training, but the enrolments are already available as a starting point.
The process was changed so that in the future the preparatory activities related to training (links to distance learning + training materials) will be submitted completely in advance, which will direct/force the organisation to have the participant information = billing information already before the training. We have eliminated the risk of not having the participant information before the training.
Results and continuous improvement (Control)
The biller monitors the invoice lead time and records if a) the lead time exceeds 4 days and b) lists the reason for the invoice lead time overrun. A data collection and tracking form has been created for this purpose. The biller reports the actual billing time to the financial officer on a monthly basis.
The process has improved considerably. During the monitoring period, 95% of invoices were invoiced on time, 59 out of 62 invoices were delivered to customers within 4 days of training. The average invoice turnaround time was 2.81 days.
During the period under review, three invoices still had a transit time of more than 4 days. When investigating the cause, it was found that during the review period of the improved process, new organisation-specific team trainings have been started for a new client organisation (a completely new process) and there were problems with three of the trainings in terms of participant data. The problem has been identified and a brainstorming session has already been held to address this.
This project was a Lean Six Sigma Green Belt training exercise project, which the participant did as part of the training and received a Green Belt certificate at the end of the project.
If you are interested in learning how to improve your processes using Lean and Six Sigma, and obtain a Green Belt Certification at the same time, please visit the training link: Green Belt training.