To reduce the lead time, production time and the resources that are utilized in all department is the focal point of a lean management system. Lean production system points the defects and errors in the activity, also excludes those parts from the activities which are not adding value to the products or services.
Lean management and manufacturing are the pillars on which lean accounting rely. The data and reports that lean accounting collects on lean manufacturing and management are also lean. The reports and data are collected without wasting time are dot accurate.
One component of a lean system is measuring the performance of key indicators in manufacturing. This helps in identifying the defective items per million. Lean accounting is one component of the lean system. Information collection is done throughout the value chain of lean managements. Performance measurement is done on three different levels in lean accounting system:
- Plant level
- Production cell
- Value chain
Management uses lean accounting to achieve its goals and objectives.
Lean accounting helps in maximizing financial impact on the whole lean system by creating strategies.Lean accounting looks after the whole value chain cost drivers, rather than just looking after one cost driver or just one machine cost drivers. In this way, it helps in creating a value addition to the complete value chain. Lean accounting helps the finance department by providing them time to work on strategies and improvements throughout the value chain.
Positives and negatives, both are pointed out in the lean accounting system. The lean system shows the drawback of inventory reduction and excess capacity of inventory also. Traditional accounting does not highlight all those negative points about inventory, while lean accounting does.
The main focus of lean accounting is to help non-accountants understand the accounts and reports related to those accounts. It helps people through the whole value chain to take the decision on those reports. Lean accounting provides relevant information and helps people in decision making.
In lean accounting, the process becomes fast and accurate on the basis of the data and reports that are generated from the system. The biggest advantage of lean accounting is that it works with lean manufacturing in adding the value to the product and also increases customer value.
Lean accounting builds people by making them the requirement for the system. In this way, employees become an important part of the organization and they provide handy solutions to the problems which help companies in making decisions.