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What is lean accounting and how can you make it work for your company?

No matter what you call it, lean accounting is a philosophy that has been around for a long time. It is focusing on the customer and eliminating waste,

Creating goals for your company to comply with in changing from the traditional types of standard types of accounting to the lean more efficient accounting plan is important. Here are some suggestions you can follow to implement changes.

- Provide accurate, timely, and understandable information to motivate a simple lean transformation through out your business. With real information, people tend to have an easier time following through with goals.

- Use the appropriate, necessary tools to make the transformation simple while maintaining financial control.
- Fully comply with the internal reports.
- Motivate the investment in people.

Often times improvement is happening in your company, but for some reason the typical accounting tracking you are using is just not showing the progress. Using out dated ways of traditional accounting as a marker of tracking financial performance proves to be less reliable. However, companies also use it to measure overall performance, not what it was designed to do - especially in today's market.

Lean accounting helps you identify and reduce waste, giving you extra capacity and freeing up cash, which is so vital to a small business. You are not losing money, having made the right part(s) faster. You are actually saving money by not making the wrong products.

Lean accounting, is dropping waste, reduces dealings. That is a problem because, to measure overall operation, traditional accounting is based on using transactions to attach to indirect costs. Lean Accounting Performance Measures, however, analyze results and processes, information that traditional accounting was never designed to recognize. It is also accurately the information you need to improve efficiency and satisfy customers.

Lean accounting also puts a great deal of emphasis on long-term goals, rather than the short-term traditional accounting looks at. In order for you to understand lean accounting and make it work for you, knowing the difference and steps to implement it will be needed.

Our metrics in the past have been another aspect of accounting that is interfering with being business lean. We have tended to measure whatever metrics where easier. With the want of being more accurate and working with less cost or mistakes, we need to measure more of what we want to improve, for example, Inventory Turns, Customer Service, and Productivity.

In order to implement lean accounting, people will need to do their part. They will need to understand how lean accounting performance measures works. Decision makers will need to understand what information to gather and how to use it. Accountants will need to know how to do overall reporting and production managers will need to know how to get personnel to follow the steps recommended to implement it.

Lean accounting advocates point out that the columns of variances from standard costs, standard material usage, standard labor rates and the like that show up in traditional financial statements make them nearly impossible for most non-financial people to understand.

Value streams cut across functional departments, so that is why one stream can include sales and marketing, production, design and cash collection costs. Ideally, each employee is assigned to a single value stream, rather than being split among several, as is traditional with most employees.

In addition to making changes to their financial statements, you can adopt lean processes often include non-financial data in the statements. This information over all can improve productivity and customer satisfaction for your business.

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