Lean Accounting

The main goal of the Lean Accounting is to support the business strategy and the lean enterprise. Lean accounting mainly focuses on the differentials and the partial derivatives by replacing a full scope image of the cost accounting.

The lean manufacturing has been originally brought into the arena by the Japanese companies like Toyota. According to the executives of the Toyota Production system, the system was originally inspired by the things they have learnt from the visits to the Ford Motor Company in the year 1920. This system has been developed by leaders like Shigeo Shingo and Taiichi Ohno soon after the Second World War. As this manufacturing Method has been adopted by the European and the American companies during 1980s, the lean method has gained prominence. They have expressed their opinion that the lean thinking method has to be applied into every aspect of the company which includes also the management accounting and the financial process.

Two Important Thrust Of Lean Accounting:

Lean accounting consists of two important thrust. The first thrust is the application of the lean method, to the control measure process. There is no big difference in reality than just applying this method to other processes. The main motif is to speed up the process, to eliminate waste and to free up the capacity.

Lean accounting Vs traditional accounting:

Basically changing the control and the measurement process of accounting is the second thrust in the Lean Accounting. These processes motivate the lean change and thereby it results in the improvement of the organization. In addition to it, it provides the information that are suitable for the decision-making, control and that which provide a better understanding the values of the customer by correctly assessing the financial impact of the lean improvement. Other traditional accounting methods which are involved in accounting like the variance reporting, the standard costing, the complex transactional control systems, the cost-plus pricing and standard costing are not required in the lean accounting. Instead these are replaced with the performance methods that are lean-focused, the value-based pricing, the box score which is used for reporting and the decision-making.

With the methods of lean thinking, an organization will become more mature. A Lean Management System (LMS) is created by the combined methods of Lean Accounting which is mainly designed to create the financial reporting, operations and planning, a motivation for a change is mainly required in order to prosper the transformation of the company.

Questions:

• What is Lean Accounting?
• What are the two important thrust of the Lean Accounting?