Accounting Considerations for Lean Organizations

By Lindsay Andrews, CPA
[email protected]

Many manufacturers utilize lean techniques to help improve manufacturing processes. In addition to the manufacturing process, the concepts of lean can extend to various other aspects of the business including accounting. There are five principles of lean and each one of these principles has applications to accounting departments.

1.) Creating Customer Value

Value is what a client is willing to pay for.

For the accounting team, there are two types of clients: customers of an organization; and internal company management. Everyone in an organization is part of the process of servicing the end client, including accounting. From the initial bids which management determines based on information provided by accounting to the invoicing created and sent directly from the accounting department; accounting has a direct impact on the customer from start to finish. Recognizing this and working toward creating a better experience (more value) for the customer, can have a huge impact on an organization.

For the company’s internal management, the accounting team can update the process of preparing financial statements and reports so that the information is more usable and easily understood by non-accountants. The accounting department can provide the information within these report that can assist with important decision making and metric tracking instead of just the standard month-end reports.

2.) Organizing the Business Around its Value Streams

Tracking costs by value streams is one of the ways that financial statements add more transparency to those outside of accounting. Value streams are everything done to create value for a customer that can be reasonably associated with a product.

If you have been implementing lean in your manufacturing process, these may already be identified. Each value stream can be considered its own distinct unit and internally the company should have accurate information to review each stream in financial reporting.

3.) Creating Flow

Flow is moving through the process. Accounting should focus on optimizing activities that add significant value and minimizing non-value added activities (reducing wasteful tasks). Accounting should be able to produce on demand continuous valuable information instead of just focusing on closing a month, quarter, or year and providing that “closed” information at scheduled points in time. There should also be a leveled-out workload in departments where employees are cross trained and multi-skilled.

4.) Empowering Employees

Employees want to do work that is valuable to the company. Be sure to engage employees for their input on internal processes and ways they feel they can help streamline those processes.

Including accounting in discussions involving the manufacturing process and company goals could also help empower employees. They may have ideas on metrics to track efficiencies and ways to achieve organizational goals that they may not have been aware even existed.

Your current accounting team may already have thoughts on time-consuming tasks that they don’t find valuable. If they are correct, their time allocated to those tasks could be shifted to something more valuable.

5.) Continuous Improvement/Pursue Perfection

Lean processes (including accounting) are not a quick fix; it is a mindset for companies to be improving every day and making continuous improvement part of the organizational culture. Employees should be striving to develop processes and systems that enable them to perform tasks perfectly while delivering on customer needs and wants.

Using some of these lean concepts in your accounting teams could help your organization produce more effective and efficient financial information that will assist in making informed and valuable decisions regarding your organization.

We would be happy to discuss this topic in more detail. You can reach out to the author of this article, Lindsay Andrews, at [email protected] or 412-281-8771.

This article was originally published in Catalyst Connection.