Lean Accounting
Reducing the lead time, production time, and resources that are utilized in all departments is the focal point of a lean management system. Lean production system points out the defects and errors in the activity and also excludes those parts from the activities that are not adding value to the products or services.
Lean management and manufacturing are the pillars on which lean accounting relies. 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 not 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 management. Performance measurement is done on three different levels in the lean accounting system:
- Plant level
- Production cell
- Value chain
Management uses lean accounting to achieve its goals and objectives.
Lean accounting helps maximize the 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 driver. 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 drawbacks of inventory reduction and excess capacity of inventory. 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 decide on those reports. Lean accounting provides relevant information and helps people in decision-making.
In lean accounting, the process becomes fast and accurate based on 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 value to the product and also increases customer value.
Lean accounting builds people by making them the requirements for the system. In this way, employees become an important part of the organization and they provide handy solutions to problems which help companies in making decisions.