How Lean Accounting aligns Lean with the accounting function
Accounting professionals are trained to be “doers” of accounting. Accounting training and education is about how to perform accounting tasks, from learning the basics of journal entries in Accounting 101 to how to close the month and report regulatory compliant financial statements.
Looking at this thinking from a lean viewpoint, the readers and users of a company’s financial statements are the customers, and they value quality, delivery and speed. These customers are served by the financial accounting system of a company.
The accounting function has another set of customers – internal customers who need relevant financial and operational information to understand the relationships between operating performance and financial performance, along with the ability to make financial decisions consistent with company strategy. These internal customers are served by the management accounting system of a company.
To understand lean accounting, accountants need to adjust their perspective from “doing” financial accounting to “practicing” lean management accounting. The first step to begin practicing lean accounting is to change thinking in the accounting function by breaking away from thinking of all of their work on a “month-to-month” basis of producing financial statements.
Lean accounting is like lean – it is a never-ending journey. The journey is practicing lean accounting and the destination is continuous financial organization improvement. This journey never ends because the destination is not final. This is the first change in perspective for accountants– changing the way we think about accounting in a lean organization. It’s not just about the technical ability of accounting to produce financial statements, it’s also about the organization as an internal customer.
Management accounting is more of a continuous process that is practiced throughout the organization on a daily, weekly, monthly and annual basis. The needs of the users of management accounting are more dynamic based on business conditions. A successful lean strategy is based on relevant, accurate and timely financial and nonfinancial information, which is supplied by a management accounting system.
The second change in perspective for accountants is the understanding and accepting continuous improvement. All business processes can improve in a lean organization, including accounting processes. It’s not that the accounting processes are bad, it’s simply that they can get better. It’s important for accountants to change the way they think about the processes they “own.” Accounting is not exempt from improvement.
The final change in perspective for accountants is creating value for your internal customers. Accountants are very good at understanding and delivering value to external customers because the quality of our work is based on GAAP/IFRS, tax laws and other regulations. Internal customers in lean organizations value specific, relevant, timely, actionable information & data which support lean practices. Accountants need to listen to what their internal customers value and deliver on that value by making the necessary adjustments to accounting processes to deliver the exact value desired.