The 501 S(c)ene

The latest view on not-for-profit accounting issues

Six Sigma, work smarter, not harder

Six Sigma, nonprofit, accounting, workflowPop quiz! What is the most important resource to a nonprofit organization?

Answer: People!

You thought I was going to say the contributions, didn’t you? While that might be what supports the mission of the organization, where would the organization be without the development department raising those contributions, the finance team making sure your tight budget is met and the CEO making sure the programs align with the mission?

Most nonprofits are challenged to be creative because they are expected to do so much but with fewer resources. This results in many employees having to wear different hats or perform multiple functions to the organization outside their main title. Adopting lean, efficient techniques is a way this can successfully be done without putting a strain on that most important resource.

The Lean Six Sigma concept looks at the value provided by an organization. This approach helps you pinpoint and eliminate the non-value-added steps, processes and inefficiencies. It requires the entire team’s buy-in, not just top management’s efforts, to see success. There are five steps to this method:

  1. Define the problem.
  2. Measure or quantify the problem.
  3. Identify the cause of the problem.
  4. Implement and verify a solution.
  5. Maintain the solution.

Here is a fictional, yet realistic, example. A nonprofit organization has both a development department and a finance department. They receive a lot of non-cash donations every year, typically received by development. The finance team tries to get an accurate listing to record on their books, yet things are often missed since communication is inconsistent through email or even sticky notes.

They learned and applied the Six Sigma Steps listed above. The defined problem is lack of a formal process for recording non-cash donations while the measurement is the non-cash donations that went unrecorded in the past as well as the people’s time wasted trying to ensure it does not get missed.

After analyzing the cause of the problem, they decided they needed to improve the communication between development and finance. They implemented a new process that included the development team completing a form when the item is received that is then sent directly to one person in accounting via email that includes the necessary information finance needs to record the non-cash donation. Then, the head of the finance team compares reports from the development’s contribution tracking system to their general ledger to ensure the process was working and maintained.

In conclusion, even little changes can be made to vastly improve processes, and utilizes the steps provided by Six Sigma can help.

Rebecca Davis