Lean Accounting Maturity Path – Getting Started with Lean Accounting

As lean production cells are put in place, a company needs to begin developing the box score data, begin transaction elimination and calculate the financial benefits of lean.


Box Score – Performance Measurements

  • Lean cell performance measurements should be implemented in all lean production cells. Additionally, visual management techniques should also be implemented
  • Senior management should begin developing the lean performance measurement linkage chart: strategic measures, value stream measures and cell measures
  • Lean performance measurements should be introduced throughout the company, especially in support and administrative processes


Box Score – Capacity

  • Current and future state value stream maps should be prepared for all value streams
  • Initial calculation of value stream capacity (productive, nonproductive and available) should be completed


Box Score – Value Stream Costing

  • Using value stream maps, identify the drivers of value stream costs
  • Begin assigning actual costs to value streams
  • Identify the costs not assigned to any value stream
  • Determine how to assign actual material cost to value streams


Transaction Elimination

  • Eliminate transactions from lean pilot cells through the introduction of back flushing material and eliminate labor reporting
  • Stop variance analysis & reporting. Variances may still occur, but they “stay in finance”
  • Simplify standard costing by reducing the number of allocations and rates used
  • Finance focuses on transaction elimination in all finance processes to create capacity for lean accounting initiatives


Lean Decision Making

  • Begin using box score data to calculate the financial benefits of lean. Illustrate how continuous improvement will improve performance measurements, eliminate nonproductive capacity and reduce costs. Then use simple scenarios projecting the financial impact of using freed up capacity to ship more orders to customers. Note – it may also be necessary to model the financial impact of significant inventory reduction, which could be a short-term reduction in profits but an increase in cash flow