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McKonly & Asbury Webinar - LEAN and the Finance and Accounting Process
 

McKonly & Asbury Webinar - LEAN and the Finance and Accounting Process

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We continued our Celebrating 40 Years of Excellence! Webinar Series with a webinar entitled "LEAN and the Finance and Accounting Process" presented by David Blain (Principal) with McKonly & Asbury! ...

We continued our Celebrating 40 Years of Excellence! Webinar Series with a webinar entitled "LEAN and the Finance and Accounting Process" presented by David Blain (Principal) with McKonly & Asbury! Thank you to everyone that attended.

David provided us with a useful understanding of how to use and implement LEAN to enhance the finance and accounting processes within your business. We focused on key concepts of LEAN and tips around how to implement those concepts for improved operational and financial reporting to business leaders, managers, and front line operations personnel.

Check out our Upcoming Events page for news and updates on our future seminars and webinars at www.macpas.com/events.

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    McKonly & Asbury Webinar - LEAN and the Finance and Accounting Process McKonly & Asbury Webinar - LEAN and the Finance and Accounting Process Presentation Transcript

    • LEAN AND THEFINANCE/ACCOUNTINGFUNCTIONDAVID B. BLAIN (PRINCIPAL)
    • LEAN AND THEFINANCE/ACCOUNTINGFUNCTIONDAVID B. BLAIN (PRINCIPAL)
    • WEBINAR AGENDA• The need for LEAN Accounting Versus Traditional Accounting Methods• LEAN Accounting and Finance Techniques• Implementing LEAN Accounting• Questions
    • THE NEED FOR LEANACCOUNTING
    • • Purchase price variance• Overhead absorption• Production variances• Standard product costs• Just-in-time inventory• Make-to-order• Make-to-order and quick changeover• Value stream profitabilityTHE NEED FOR LEAN ACCOUNTINGTraditional Measurement LEAN Behavior
    • THE NEED FOR LEAN ACCOUNTING, CONT.• Traditional accounting often shows bad results when good LEAN change ishappening.• Traditional accounting misleads us about the true impact of LEAN change.• We must understand the LEAN Economics; eliminate waste, grow thebusiness.• Understand the financial and operational benefits of LEAN and you can makebetter choices.
    • THE NEED FOR LEAN ACCOUNTING, CONT.• The purpose of LEAN Accounting is to create an accounting, control,measurement, and decision-making system that supports and enhances theCompany’s LEAN strategy.• LEAN Accounting is not an additional system.• LEAN Accounting replaces the traditional accounting methods.• LEAN Accounting is itself LEAN.
    • LEAN ACCOUNTING ANDFINANCE TECHNIQUES
    • LEAN ACCOUNTING AND FINANCE TECHNIQUESLEAN Consist of 5 Key Principals• Customer Value• Value Streams• Flow and Pull• Empowered People• Pursuit of PerfectionWork and organize around the flow of the Value Stream
    • 1. VALUE STREAMS• Create a team focused on Value and Flow.• Close to the customers and clear understanding of value.• Flow from sales and delivery and cash.• See the flow and see the waste.• Eliminate waste and speed up flow.• Clear accountability.
    • 1. VALUE STREAMS, CONT.• Finance and Accounting are considered “Outside” of thevalue stream.• These people “support” the value stream.• Build a team that understands its customers are theinternal value stream.• Build reporting and modeling around the needs of thevalue stream.
    • 2. SIMPLIFIED REPORTING• Quick, understandable and timely value stream reporting.• Financial reporting for better cost controls.• Weekly value stream meetings to understand spendingand make improvements.• Clear accountability for revenue, costs and profits.
    • 2. SIMPLIFIED REPORTING, CONT.Value Stream Income StatementGross Revenues $XXXDirect Cost• Materials XXX• Labor XXX• Facilities XXX• Machines XXXGross Profit $XXX
    • 2. SIMPLIFIED REPORTING, CONT.Benefits of a Value Stream Income Statement• Understood by everyone• Separates value stream profit from financial accounting adjustments.• Accurate cost information• Real spending• Checkbook of the value stream• Relationship to continuous improvement• Eliminate waste – reduce actual costs
    • 3. WEEKLY PROBLEM SOLVINGWeekly Problem Solving Drives Improvement• Visual display of measures.• Measures updated in the value stream.• Weekly value stream meetings to analyze results.• Root causes identified and solutions created.
    • 4. BOX SCORES• See the true performance• Operational, capacity usage, financial• Keys that drive good financial outcomes• Make better decisions• See the true impact on the value stream• Valid, up-to-date information• Evaluate many scenarios and what-ifs• Standardized work for decisions• Understand Value Stream Performance and Make Good Decisions
    • • Improve Process Capabilities• Improve Value Provided To The Market• Relentlessly Eliminate Waste• Create Opportunity to add demand• Increase Revenue and Cash Flow• Reduce Costs and Increase Cash Flow4. BOX SCORES, CONT.
    • Operational/Capacity Measures• Units per person• On time shipments• Average Cost• AP/AR Days• Productive Time• Non Productive Time• Available CapacityFinancial Measures• Revenue• Material Costs• Inventory• Value Stream Profit• Value Stream Return on Sales4. BOX SCORES, CONT.
    • 5. VALUE BASED PRICING• Price and cost are not related.• Price is determined by the value created for the customer.• We need a deep understanding of what creates value forour customers.• Differentiate customers, products, and markets based onvalue.
    • 5. VALUE BASE PRICING, CONT.Primary Drivers of Value for Customers• Direct financial benefit to the customer.• Customers’ of customer have direct financial benefit that resultsin additional services for customer.• Risk reduction.• Ease of doing business.• Intangible issues.
    • 5. VALUE BASE PRICING, CONT.Voice of the Customer• To understand the customers’ value proposition. We mustlisten!• Voice of the Customer is a systematic way to learn what thecustomer values, why they value these things, and how muchthey value them.• From this we can calculate the value we create for the customer,set a value-based price, and decide the target cost.
    • 6. TARGET COSTINGMost Companies: Price = Cost + MarginLEAN: Cost = Price – Profit NeededTarget cost is defined as the allowable cost that can be incurred ona product and still earn the required profit
    • 6. TARGET COSTING, CONT.• Creates deep understanding of the value and costs.• Design products to meet the value needs of the customer.• Design products to meet the profit needs of the business.• Drive value stream spending to match target costs.Cost Are Driven By Value.Get The Right Costs.
    • 6. TARGET COSTING, CONT.Achieving Target Costs• Most costs are determined during design.• Planned material costs are tracked and reported against the target material cost throughoutthe design process.• Tooling and other start up costs are tracked and reported throughout the design process.• Concurrent engineering ensures that the new products are designed for flow through thevalue stream.• Additional costs of production and distribution are assessed using the box score.• After product launch the value stream team tracks the actual costs through value streamaccounting.
    • 7. BUDGETING VS. PLANNING• Budgeting process is complicated and time consuming .• Budgets are usually out of date before they are implemented.• Budgeting is classic “Top Down” management.• LEAN companies create financial forecasts each month comingfrom the planning process.• Sales, Operations and Financial Planning (SOFP)
    • 7. BUDGETING VS. PLANNING, CONT.SOFP Eliminates Annual Budgeting• Financial forecast is updated monthly with 15-24 monthprojections.• Authorized by Executive Leaders• Financial forecasts are relevant, accurate and timely.• Better control and accountability.
    • 7. BUDGETING VS. PLANNING, CONT.SOFP Has Continuous Improvement Built Into the Process• Sales and Capacity forecasts are reviewed for accuracy and bias,and projects done to improve.• Financial results are reviewed for achievement using a financialreport and a box score.
    • IMPLEMENTING LEANACCOUNTING
    • IMPLEMENTING LEAN ACCOUNTINGIdentify Roles and Responsibilities of Senior Leadership• Include LEAN Accounting in strategy deployment.• Assign people full-time to LEAN Accounting implement teams.• Approve, sanction and support implement plans.
    • IMPLEMENTING LEAN ACCOUNTING, CONT.Establish a Formal Implementation Process• Establish a pilot location• Assess and learn• Full deploymentThe Key to Successful ImplementationLEARN BY PRACTICING
    • IMPLEMENTING LEAN ACCOUNTING, CONT.Benefits of a LEAN Accounting SystemProfit Assumption• Increase revenue by providing superior value to customers.• Manage cost by managing flow and waste.Measures• Frequent reporting of process measurements – Flow, Quality, Productivity, Deliveryand Cost
    • IMPLEMENTING LEAN ACCOUNTING, CONT.Benefits of a LEAN Accounting SystemBehaviors• Make-to-order• Short lead times• Visual Controls• Continuous improvement/elimination of wasteResults• Superior Customer Value - Quality, Delivery, Lead Time
    • David B. Blain• dblain@macpas.com• 717-761-7910• www.leanaccountants.comCONTACT