Getting Started With Lean Accounting

Introduction

The aim of Lean Accounting is to help various lean enterprises with a business strategy. It looks forward to shift from conventional methods of accounting to modern system of accounting that evaluates and motivates outstanding business practices with lean business organizations.

The development of lean manufacturing or simply lean was done by the Japanese companies, mainly Toyota that became one of the leading automobile companies of the world from a small car company due to their lean methodologies. The executives of Toyota were inspired from their visit to Ford’s manufacturing unit and later developed the Toyota Production System which is quite like the lean manufacturing. As more and more European and American companies adopted lean methods they understood that its need to be applied to other aspects like finance and management accounting processes of the enterprise. Lean accounting offers timely, understandable and accurate data which may be used by sales people, accountants, operations leaders, lean improvement groups, managers and others. The data provides clear understanding of the performance of the company. The performance may be of operational or financial nature. Through lean accounting reporting members of the organization are motivated to give lean improvement forward movement.

Application To Accounting Processes

The application of lean accounting is generally done in companies that opt for lean methods. Hence, the application of lean accounting is mainly done in the manufacturing companies. Originally, its application was strictly restricted to the manufacturing companies only. With passage of time the lean process is being adopted in other kinds of business organizations such as government institutions, educational bodies, healthcare service providers, financial services providers, etc. However, no records have been found where lean accounting is applied in these industries except few initial attempts of using such methods. In the initial stages of lean process application of lean improvement is necessary in the entire organization. Accounting processes is the most suitable area for its application. Some the areas include accounts receivable, accounts payable, payroll, month-end close, expense reporting, cost accounting and many more.

Lean Performance Measurements

The production and other processes control can be done through visual measurement of performance at the levels like value stream and shop floor. These evaluations eradicate the requirement of the variance reporting and shop-floor tracking favored by conventional cost accounting methods. There exists a minimum of three levels of operational performance evaluation. Some of the typical measurements are:

• Process control
• Productivity
• Linearity and complete improvement
• Flow
• Participation of people in CI
• Quality and Standardized Job
• Safety

Conclusion

Therefore, in all lean accounting is one of the fastest going areas of accounting which is going to find a lot of application in the near future with companies from various sectors introducing lean methods.