Lean accounting
The purpose of Lean Accounting is to support the lean
enterprise as a business strategy. It seeks to move from traditional accountingmethods to a system that measures and motivates excellent business practices in
the lean enterprise.
Introduction
What we now call lean manufacturing was developed by Toyota
and other Japanese companies. Toyota executives claim that the famed Toyota
Production System was inspired by what they learned during visits to the Ford
Motor Company in the 1920s and developed by Toyota leaders such as Taiichi Ohno
and consultant Shigeo Shingo after World War II. As pioneer American and
European companies embraced lean manufacturing methods in the late 1980s, they
discovered that lean thinking must be applied to every aspect of the company
including the financial and management accounting processes.[1] (See also,
William Deming.)
There are two main thrusts for Lean Accounting. The first is
the application of lean methods to the company's accounting, control, and measurement
processes. This is no different from applying lean methods to any other
processes. The objective is to eliminate waste, free up capacity, speed up the
process, eliminate errors and defects, and make the process clear and
understandable.
The second (and more important) thrust of Lean Accounting is
to fundamentally change the accounting, control, and measurement processes so
they motivate lean change and improvement, provide information that is suitable
for control and decision-making, provide an understanding of customer value,
correctly assess the financial impact of lean improvement, and are themselves
simple, visual, and low-waste. Lean Accounting does not require the traditional
management accounting methods like standard costing, activity-based costing,
variance reporting, cost-plus pricing, complex transactional control systems,
and untimely confusing financial reports. These are replaced by
lean-focused performance measurements
simple summary direct costing of the value streams
decision-making and reporting using a box score
financial reports that are timely and presented in
"plain language" that everyone can understand
radical simplification and elimination of transactional
control systems by eliminating the need for them
driving lean changes from a deep understanding of the value
created for the customers
eliminating traditional budgeting through monthly sales,
operations, and financial planning processes (SOFP)
value-based pricing
correct understanding of the financial impact of lean change
As an organization becomes more mature with lean thinking
and methods, they recognize that the combined methods of Lean Accounting in
fact creates a Lean Management System (LMS) designed to provide the planning,
the operational and financial reporting, and the motivation for change required
to prosper the company's on-going lean transformation.[2]
Up until 2006, the methods of Lean Accounting were not
clearly defined because they had been developed by different people in
different companies. A meeting was held at the 2005 Lean Accounting Summit
(Lean Accounting Summit) conference including a number of leaders in the field,
and a decision was made to develop a document called "The Principles,
Practices, and Tools of Lean Accounting" (PPT) (Lean Accounting PPT).
While the methods of lean accounting are continually evolving, the PPT lays out
the primary methods of Lean Accounting and shows how they fit together into a
Lean Management System. The PPT emphasizes not only the tools and methods of
Lean Accounting, but also the need for focusing on customer value and the
empowerment (or respect) for people. The PPT was published in Target, the
Journal of the Association of Manufacturing Excellence (AME) in 2006.
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