Leadership / Management

The ‘skinny’ on lean: What every CPA needs to know

We recently offered a great webcast by one of the pioneers in lean accounting, Jean Cunningham. As a former CFO of several manufacturing companies, author of three books on "lean" and lean consultant, Jean gave us a great introduction to lean accounting in our two-hour webcast. Now I know why this movement is quickly gaining traction and is something CPAs need to pay attention to.

Here are my "cliff notes" from our session:

Cunningham defines "lean measures" as "measures that match the objective of the company to meet customer needs with minimal waste while respecting employees and producing positive cash flow."

This says it all -- customer-centric thinking, minimal waste, respect for employees (via team learning) and cash-flow emphasis! She goes on to describe how lean harnesses the collective genius of the organization through the use of the team-based continuous improvement methodology and counters the "big-bang" theory of corporate change by a few select experts. (Haven't we all experienced one too many of those?)

The three goals of lean accounting are to:

  1. support change through continuous improvement,
  2. optimize information, and
  3. eliminate waste, or "muda," as it is referred to in the lean movement.

These goals help you reduce closing time for financial reporting, increase your relevance to your "internal customers" (your operating units), reduce unnecessary entries and, most important, free your time up to do more value-added activities.

Lean_transformation The slide at the right depicts Jean's view of turning our world upside down by allowing us to spend more time on consulting about the future and analyzingthe results by eliminating and rationalizing transaction processing. How many of us constantly say that we are held hostage by the transactions -- spending way too much time "accounting" for the business than applying our professional judgment to helping our companies?

Where do you start?

Jean offered these tips to get you started:

  1. Get up to speed on lean: Go to a course (we have some listed below) or start a reading group to educate your team about the benefits and ways to get lean.
  2. Look for existing lean activities or events in your organization and ask if you can participate or observe.
  3. Target your f/s closing process: Map it and look for opportunities to eliminate waste and reduce time. (Other ripe accounting processes include payroll and A/P).

The other big "a-ha" for me was that we (the MACPA) have already started building lean tools for you in the form of financial statement analysis and reporting tools (www.financialdashboard.com and www.financialscoreboard.com) that focus on business strategies and cash flow in the form of three bottom lines (cash flow, net profit and return on assets) and link all three financial statements in a way I believe would truly support lean activities.

You might want to check out out course called Executive Finance for Operating Leaders on Nov. 20 at our Towson Center to get a hands-on guide to some great tools you can use to support lean efforts. Or check out our Integral Operations Finance Toolkit to learn about these tools online with a tele-coaching option.

Want to learn more? Come see us at the Lean Accounting Summit in Orlando, Fla., on Sept. 26-28 at the Disney Yacht and Beach Club. Don't forget to use "MACPA" in the promo code when you register to get a $100 discount.

Other lean references: