Preview To Lean Accounting Seminar 2010

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Preview To Lean Accounting Seminar 2010

  1. 1. Preview to “ Growing Revenues and Profits With Lean Beans” One-Day Seminars 2010 Two-Day Workshops March & April 2010
  2. 2. Financial Executive Research Foundation Lean Accounting Overview Lean Recreates the Financial System Conclusion 1 2 3 4 Traditional Standard Cost vs Lean Target Cost Agenda
  3. 3. <ul><li>Traditional Accountant </li></ul><ul><li>“ Bean Counter” </li></ul><ul><li>Messenger of “Doom & Gloom” </li></ul><ul><li>Concerned only with Control </li></ul><ul><li>Variance Analysis / Paralysis </li></ul>FERF: Financial Executive Research Foundation
  4. 4. FERF <ul><li>“ Initiative on Organization and Strategy in Financial Management” </li></ul><ul><li>Commitment to Cultural Change </li></ul><ul><li>Finance plays a major role in this Organizational Change </li></ul>
  5. 5. “ Old” Paradigms vs “New” <ul><li>MBO </li></ul><ul><li>What gets done & what gets measured counts </li></ul><ul><li>Vertical organization </li></ul><ul><li>Control </li></ul><ul><li>Isolated “functions” </li></ul><ul><li>MBV (VALUE) </li></ul><ul><li>“ How” we achieve success is what really counts </li></ul><ul><li>Horizontal organization </li></ul><ul><li>Empowerment </li></ul><ul><li>Integrated Teams </li></ul>
  6. 6. Cost Accounting vs Cost Management <ul><li>Cost Accounting = Transactions </li></ul><ul><li>= “Bean counting” </li></ul><ul><li>= Standards </li></ul><ul><li>Cost Management = Target costing </li></ul><ul><li>= QFD </li></ul><ul><li>= Cost Planning </li></ul>COSTS Should Not Just HAPPEN! “ Old Paradigm” “ New Paradigm!”
  7. 7. “ Themes” Found to be True in Lean Enterprises <ul><li>Accountants must transform themselves from “bean counters” to “business partners.” </li></ul><ul><li>Financial Statements must be in a language </li></ul><ul><li>that operations people can understand! </li></ul><ul><li>Change focus from Cost Accounting to Cost Management . </li></ul><ul><li>Mind what you measure! </li></ul><ul><li>“ Make-the-Month” mentality is THE barrier. </li></ul>
  8. 8. Traditional Standard Cost System Encourages the Wrong Behavior! <ul><li>Standard Cost tells us to keep all of our people & all of our machines busy 24/7 making product to absorb overhead. </li></ul><ul><li>Does not provide daily information for Continuous Improvement. </li></ul><ul><li>Takes more time and effort away from actual business of satisfying the Customer. </li></ul><ul><li>Measures performance monthly against last year’s “most representative” actual cost. </li></ul><ul><li>Lean tells us not to “make one” until the customer “takes one.” </li></ul><ul><li>Lean provides daily and hourly information in Visuals. </li></ul><ul><li>Lean gives the customer what he wants, when he wants it_ not building inventory. </li></ul><ul><li>Measures actual cost performance this month against this month’s “target” and last month’s actual. </li></ul>
  9. 9. Target Cost The New Lean Cost System A Target Cost is the allowable amount of cost that can be incurred on a product and still earn the required profit from that product. Target Cost = Market Price – Target Profit
  10. 10. Financial Reporting And GAAP Standard Cost vs. Target Cost Internal Performing “Stretch” Goals Internal Measurement Management Accounting and Contribution Margin External Measurement Ties to the “Books” Standard Cost vs. Target Cost
  11. 11. <ul><li>Price is Customer driven today </li></ul><ul><li>Target Cost is not cost plus! </li></ul><ul><li>Price determines Cost </li></ul><ul><li>Design is key </li></ul><ul><li>Uses cross-functional Teams (Cost reduction is no longer just </li></ul><ul><li>an accountant’s job!) </li></ul><ul><li>Suppliers involved early </li></ul><ul><li>Customer-driven </li></ul><ul><li>Not an achievement of standards, but “How high can we go?” </li></ul>Target Costing
  12. 12. Traditional Standard Costing vs Lean Cost Management <ul><li>Standard Cost </li></ul><ul><li>Absorption </li></ul><ul><li>Variance Analysis /Paralysis </li></ul><ul><li>O/H allocation based on DLH & MH </li></ul><ul><li>Cost System = Standard & Absorption </li></ul><ul><li>Target / Actual Cost </li></ul><ul><li>Low/No INV, & Var Cost </li></ul><ul><li>Variance of Actual to Target/ Trend Analysis </li></ul><ul><li>O/H allocation based on Cycle Time </li></ul><ul><li>Cost System = anything that drives the right behavior </li></ul>
  13. 13. Traditional Standard Costing vs Lean Cost Management <ul><li>Valuing Inventory </li></ul><ul><li>Controlling Transactions </li></ul><ul><li>Financial Metrics and MBO </li></ul><ul><li>S/T Goals (Operating Income) </li></ul><ul><li>Make-the-Month </li></ul><ul><li>Cost Accounting </li></ul><ul><li>Eliminating Inventory </li></ul><ul><li>Controlling Processes </li></ul><ul><li>Non-financial Metrics and MBV </li></ul><ul><li>L/T Goals (Inv Turns, Customer Satisfaction </li></ul><ul><li>Cycle time = Takt time </li></ul><ul><li>Cost Management </li></ul>
  14. 14. Traditional Standard Costing vs Lean Cost Management <ul><li>Cut Costs </li></ul><ul><li>Save Cash </li></ul><ul><li>ABC Cost Allocation </li></ul><ul><li>Traditional Standard Cost P&L </li></ul><ul><li>Cut Wastes </li></ul><ul><li>Create Cash </li></ul><ul><li>No Cost Allocation (all costs are direct costs) </li></ul><ul><li>“ Checkbook style” P&L </li></ul>
  15. 15. Register Today! <ul><li>Lean Financial Statements </li></ul><ul><li>Lean Strategic Budgeting / Target Costing </li></ul><ul><li>Lean Measurements / Metrics </li></ul><ul><li>Lean HR, Lean SOX, Transactional Lean </li></ul><ul><li>Lean Six Sigma </li></ul>View our schedule at www.leanbeans.net Seminar contains more additional information on…

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