Lean Accounting: the New Frontier of Management Control

Traditional cost accounting methods based on standard product costing are totally inadequate in a lean environment: on the one hand they are in themselves complex and time consuming, on the other they do not measure the true effects of a lean transformation and often lead to the wrong decision. On the contrary value stream accounting, which is the corner stone of lean accounting, provides on a weekly basis useful economic and performance measures, is simple to operate and encourages sound business decisions.

In short, lean Accounting:

• Actively supports the lean transformation.

• Helps grow the business by providing better information for better decisions.

• Provides lean-focused measurements and reporting that motivate lean change.

• Shows the true financial impact of lean improvement leading to growth and profitability.

•Provides information that is clear and understandable to everyone, without obscure financial language.

• Is itself lean, simple, and low waste.

The “pillars” of Lean Accounting are the following: to provide useful performance measurements, to replace traditional standard costing with value stream costing, to support sound decision making, to eliminate all unnecessary transactions, to measure the true effects of lean improvements, to make the budgeting process leaner and more effective.

The approach to lean accounting should be gradual and follow the lean transformation process. The best way to start is with a training session for people not only from accounting but also from operations, technical design, marketing, purchasing etc. After this, lean accounting should be applied to a pilot value stream in order to test the methods and see the benefits. After this first test it can be extended to all value streams.

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If you are interested in getting more information on lean accounting go to the website area Management Innovation, you may find articles and analysis both in English and Italian.

Every year GC&P, together with BMA, organize public seminars on lean accounting and the Italian edition of the Lean Accounting Master Class. Discover the goals and topics of the Lean Accounting Master Class!

Do not hesitate to contact me to get more information on management control and lean accounting.Write to: a.canepari@gc-partners.eu.