Why Do Lean Companies Like Toyota Use Lean Accounting?

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Most manufacturing companies use the old style Standard Cost accounting. Lean organizations use Lean Accounting. Why do lean companies use Lean Accounting?

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Why Do Lean Companies Like Toyota Use Lean Accounting?

  1. 1. Why is Lean Accounting Important to Lean Organizations? Why do companies like Toyota and many others use Lean Accounting?
  2. 2. Why is Lean Accounting Important to Lean Organizations? The bottom line answer is the Bottom Line. Lean Accounting increases sales, reduces costs, grows the business, and greatly improves the Company’s Bottom Line, but I want to go into a little more detail.
  3. 3. What Does Lean Accounting Do for Us? Timely Information Everybody Can Understand and Use Increases Sales & Reduces Costs thru Better Decisions Correctly Shows the Financial Impact on Lean Improvement Motivates Everybody Towards Long-Term Lean Improvement Simple and Much Less Work There are 5 issues we need to look at. Let’s look at them one at a time.
  4. 4. What Does Lean Accounting Do for Us? Timely Information Everybody Can Understand and Use Information everybody understands lead to better results. Almost nobody understands standard costing. It uses complicated accounting methods like allocations & overhead absorption
  5. 5. What Does Lean Accounting Do for Us? Increases Sales & Reduces Costs thru Better Decisions Good, timely information leads to people making better decisions. This brings higher sales, better customer service, & reduced costs. When you make decisions using a standard cost the information is always misleading owing to allocations & bad assumptions.
  6. 6. What Does Lean Accounting Do for Us? Correctly Shows the Financial Impact of Lean Improvement Lean Accounting shows the true, bottom line benefit of lean improvement. You can plan this in advance, and check the actual results after the changes. There is no valid way of calculating the financial impact of lean improvement using standard cost accounting reports and methods.
  7. 7. What Does Lean Accounting Do for Us? Motivates Everybody Towards Long-Term Lean Improvement Lean Accounting financial and operational measurements motivate lean thinking and action for everybody in the value stream. Traditional accounting, control, and measurements methods actively push back against lean improvement.
  8. 8. What Does Lean Accounting Do for Us? Simple and Much Less Work Much less work for the accountants, but also for operations people, engineers, managers, supervisors, and people supporting the customers. Traditional cost accounting has millions of wasteful transactions to provide reports. Reports lead to wasteful meetings, reconciliations, and useless questions.
  9. 9. Please Don’t Think I Am Slamming Standard Cost Accounting. I Am Not. Standard costing was developed in the 1920’s when mass production was the big idea. Lean thinking and methods are the opposite of mass production. Standard Costing may be a fine system – but it is the ENEMY OF LEAN
  10. 10. So Let’s Put All This Together Timely Information Everybody Can Understand and Use Increases Sales & Reduces Costs thru Better Decisions Correctly Shows the Financial Impact on Lean Improvement Motivates Everybody Towards Long-Term Lean Improvement Simple and Much Less Work If you have these 5 attributes of Lean Accounting working in your company. Then you have a recipe for growth, bottom-line profits and cash flow.
  11. 11. So Let’s Put All This Together Timely Information Everybody Can Understand and Use Financial & Operational Measures Everybody Understands Leads to Better Processes and Lower Costs
  12. 12. So Let’s Put All This Together Increases Sales & Reduces Costs thru Better Decisions Better decisions lead to better pricing, production, design, low inventories, short lead-times, better customer service, and high productivity.
  13. 13. So Let’s Put All This Together Correctly Shows the Financial Impact on Lean Improvement If you can recognize the true financial impact of lean improvement, then you can pick the improvements that give you the best results. As you eliminate waste in your processes you will free up a lot of capacity. You can then use that capacity to design, make, & sell more products at NO ADDITIONAL COST.
  14. 14. So Let’s Put All This Together Correctly Shows the Financial Impact on Lean Improvement This leads to the unprecedented growth, profits, and cash flow that is the touchstone of lean organizations.
  15. 15. So Let’s Put All This Together Motivates Everybody Towards Long-Term Lean Improvement If you have measurements and financials that motivate people to on-going waste elimination, then growth and profitability is almost limitless.
  16. 16. So Let’s Put All This Together Simple and Much Less Work Lean Accounting is Lean Itself. When you eliminate 50% or more waste from the accounting, control & measurements processes; Everyone can add more value for long-term business success.
  17. 17. So Let’s Put All This Together And Lean Accounting is fully compliant with GAAP and all the external reporting requirements in the US and other countries..
  18. 18. This Is Why Lean Accounting is Used by the Best and Most Profitable Lean Enterprises information@maskell.com +1 609 239 1080

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