Summary of the Article "Lean Accounting"..What's It All About

Summary of the Article

“Lean Accounting what’s it all about”

This article was an excellent introduction to the principles and objectives of lean Accounting. Also, it is a great example of one of the primary learning objectives for this course of “understanding the dramatic ways in which the field of managerial accounting is changing”. The article gives an overview of what lean accounting is, an example of it being implemented in the manufacturing industry, highlights the results of that implementation, addresses how a company can transition to lean accounting and finally discusses how the service sector can benefit from lean accounting practices as well.

What is Lean Accounting?

Generally speaking, Lean accounting is about eliminating waste and thinking lean.

The article list five steps in lean thinking:

1) Define value – customers are the ones who define value

2) Identify the value system – where employees see how their organization functions from the customers perspective

3) Make the value stream flow – move to a one piece flow of production

4) Implement a pull system – customer demands dictate the production level

5) Strive for perfection – leverage front line workers rather than relying solely on management

The article gives the example of Midwest Industrial Products (MIP). MIP had the challenge of management and accounting not being on “the same page” so to speak. The goals of management did not translate productively on the accounting reports (specifically the income statement), and the income statement did not accurately reflect the achievements and objectives of management. As a result, they switched to lean accounting. As a result of this change to lean accounting the following was achieved by MIP:

1) They were able to reduce 18 labor categories to 2 which resulted in fewer errors and quicker processing.

2) Inventory levels reduced

3) Waste decreased

4) Deliveries increased

5) “The floor” (or the front...