Lean Solutions
Lean Accounting
Lean manufacturing and other lean operations initiatives
create a company environment that demands a solution to the inflexbility and low value of traditional cost accounting and financial reporting. Lean accounting, the proven alternative, enables the finance and accounting functions to partner with the evolving lean enterprise. When the finance department revamps their processes with lean methods, the time savings and communication gains are fantastic. Lean accounting provides a stage that enables the accounting team to move
from a transaction focus to a new high value role of consulting
within other areas of the company.
What is Lean Accounting?
It is the application of lean principles to the accounting and associated functions within the enterprise. The idea is simple, but the application is not obvious within the framework of traditional accounting systems.
Lean Accounting was born in the early 90’s through the experiences of Jean Cunningham at Lantech, Orry Fiume at Wiremold, and Mark DeLuzio at Danaher. It was frowned on mightily by financial professionals from the start and is by many to this day. Change in long-established systems is difficult to visualize and harder yet to take the first step towards implementation.
What is Lean Accounting?
It is the application of lean principles to the accounting and associated functions within the enterprise. The idea is simple, but the application is not obvious within the framework of traditional accounting systems.
Lean Accounting was born in the early 90’s through the experiences of Jean Cunningham at Lantech, Orry Fiume at Wiremold, and Mark DeLuzio at Danaher. It was frowned on mightily by financial professionals from the start and is by many to this day. Change in long-established systems is difficult to visualize and harder yet to take the first step towards implementation.
What does it do?
- Identifies and eliminates non-value add waste in the accounting process and IS reporting processes
- Improves visual reporting on product lines
- Usually leads to the elimination of standard cost accounting
- Adheres to all GAAP recommendations.
- Does not impede Sarbanes-Oxley rules.
- Realigns accounting activities to a consulting role rather than a transaction role.
Lean Accounting Semantics
Lean accounting has two distinct areas that may be applied at different times on your lean journey.
"Lean for Accounting" = Applying lean tools (5S, process or value stream mapping, kaizens, etc.) to streamline the processes within the accounting and finance functions to minimize the consumption of resources and eliminating waste.
"Accounting for Lean" = Modifying traditional financial statements and reports to provide "Plain English Financial Statements" throughout the enterprise.
While there is a distinct differentiation between these two areas, the broader term "lean accounting" is often applied to both interchangeably.
Lean accounting has two distinct areas that may be applied at different times on your lean journey.
"Lean for Accounting" = Applying lean tools (5S, process or value stream mapping, kaizens, etc.) to streamline the processes within the accounting and finance functions to minimize the consumption of resources and eliminating waste.
"Accounting for Lean" = Modifying traditional financial statements and reports to provide "Plain English Financial Statements" throughout the enterprise.
While there is a distinct differentiation between these two areas, the broader term "lean accounting" is often applied to both interchangeably.
| "Costs do not exist to be calculated. Costs exist to be reduced.” — Taiichi Ohno, the Toyota Production System "You should not need an MBA to understand the numbers in your company." — Jean Cunningham |
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Short Stories |
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| READ | Financial Worries? Take Action with Lean NOW! — Actions you can take now to improve cash flow. |
| READ | Greif Battles Administrative Waste — A client newsletter on the benefits of a Close the Books kaizen event. |
| If People Would Only Follow the Process — Is a working process something to be satisfied with or something to cast a critical eye at? | |
| The Auditor's Encroaching Elephant — How will auditors add value to clients who have joined the growing mass of very non-traditional lean manufacturers? | |
| Days to Close Case Examples — Some typical results from our kaizen events. | |
| Pricing Custom Products without a Standard Cost System — A useful model based on constraints. | |
