Business Briefings

Lean Six Sigma / Lean Accounting

Enable process ownership.

Provide timely information that is easily understood by nonfinancial co-workers and is actionable. Encourage process conformance by developing performance measures that link each employee’s actions to a unifying set of lean strategic objectives that support overall enterprise success.

Think sustainable growth.

Rather than obsessing with the expense side of the income statement and targeting employee layoffs, lean accountants recognize that net income can also be increased through sustainable sales growth. Using re-deployable human resources to alleviate constraints and grow the business increases employee commitment to the organization. Accountants can help in this change of focus by identifying growth opportunities as people, machines, and space become available.

For example, traditional accounting is compelled to allocate 100 percent of occupancy costs to products. Lean accounting allocates only the costs associated with the space utilized by enterprise value streams. This process highlights two key benefits:

The value stream is motivated to continually reduce their footprint, including any idle inventory storage.

The space and the cost of unutilized resources are made visible to decision makers whose task it becomes to grow the business—either increase sales or develop new markets.

Analyse enterprise performance over the long term.

Obviously, pressures from the stock market to meet the analyst’s quarterly earnings forecasts is a non-negotiable fact of life in a world dominated by traditional thinking. Nonetheless, lean accountants can strike a better balance between the short-run and long-run views of the enterprise.

For example, inventory levels usually drop substantially during a lean transformation, which in turn causes a drop in absorption net income. The accountants can react to this artefact of the financial accounting process by either seeking to assess blame or proactively managing the expectations of senior managers by giving them an advance warning of the short term “hit” to earnings. Lean accountants can also champion a longer-term view by emphasizing nonfinancial lean performance measures that drive future financial performance.

Partner non financial workers.

Creating a culture of cooperation is better than maintaining arm’s length relationships with those who supposedly need to be monitored and controlled. Lean accountants seek to learn from their operational business partners who possess process knowledge not only because it improves the quality of the cross-functional, team-based decision making process, but also because it builds the self-esteem of those doing the educating. Similarly, lean accountants seek to build a shared commitment to common enterprise goals by participating in Kaizen events across the organization.

Streamlining the labour time consumed by financial reporting requirements and Sarbanes-Oxley compliance frees up time for accountants to contribute to managerial accounting.