Lean Accounting

“Money is the language of business so it is really important to have an understandable language. Operations and finance have to come together.”

In order to restructure financial statements to provide a lean accounting statement presentation in addition to the traditional presentation of standard cost the company needs to get rid of their standards cost systems.

The key characteristics of Lean accounting are: “(1) separate variable from non-variable costs, (2) separate direct from shared between value streams, (3) separate accounting transactions for labor and overhead, (4) use easy to understand language, and  (5) organize by groupings meaningful to the business.”

Also “You can’t do lean accounting without doing lean operations. You need to do value stream mapping and a spaghetti diagram, and then reorganized by value streams: The value streams are supported by marketing, sales, production, engineering, customer service, and technical support.

The benefits of lean accounting have been:

Financial x-ray of company, timely reporting, consistency with GAAP, insight into economics, insight into traditional accounting, internal diffusion of financial results, and a baseline for incentive programs and the performance bonus for employees.”

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