Calculating the Financial Benefits of Lean using Lean Accounting – Part 4

The final step in this process is a comprehensive plan to present to senior executives with a financial analysis of each alternative and each alternative’s impact on the overall financial position of the company. This plan should use established lean accounting principles, practices & tools in its analysis.

The box score should be the primary analysis tool when evaluating the financial benefits of lean. A box score is a one-page summary of operational and financial results of the company along with the state of its productive, nonproductive & available capacity. The box score will illustrate how business decisions that have positive impact on operational and capacity improvement will yield future financial improvement.

It is important for this plan to be presented to senior management as soon as possible, after a future state value stream map has been created. The reason this is so important is that it may take some time to implement some of these alternatives and the foundations for new programs, policies and initiatives need to be in place to be immediately implemented as capacity becomes available.

One of the roles of finance, and its leadership, in any organization is to be an objective, non-partisan advisor to executives as to the financial soundness of business decisions. Many, but not all, lean initiatives begin at the operational level and at some point need executive approval. By leading the effort to show the financial benefits of lean, the finance team will clearly show to executives that the transformation to a lean company will achieve positive financial results.