2nd Edition

Practical Lean Accounting A Proven System for Measuring and Managing the Lean Enterprise, Second Edition

    475 Pages 123 B/W Illustrations
    by Productivity Press

    475 Pages
    by Productivity Press

    The methods and concepts presented in the bestselling first edition revolutionized the approach to the management and control of Lean companies. Enhanced with extensive end-of-chapter exercises and downloadable resources with Lean accounting tools, the second edition of this preeminent practitioner’s guide is now suitable for classroom use.

    Practical Lean Accounting: A Proven System for Measuring and Managing the Lean Enterprise, Second Edition explains exactly what it takes to transform a traditional accounting system to one that supports and enhances a company’s Lean efforts. Defining the fundamental principles of Lean accounting, it demonstrates how to use them to identify and eliminate wasteful transactions. The book includes coverage of cell performance measurement, use of the box score, operational and financial planning, cost targeting, Lean accounting diagnostics, and value stream mapping. Retaining the easy-to-use format that made the first edition a bestseller, this updated edition includes:

    • A new section on the use of value stream performance measurements in continuous improvement
    • A re-written Target Costing chapter that emphasizes a value-based approach to the management of the Lean value system
    • A Lean Accounting Diagnostic tool to help you assess progress and develop a plan for implementing changes
    • Cutting-edge examples that illustrate implementation in accounting departments
    • Downloadable resources with data from the ECI Value Stream Cost Analysis case study included in the text, Excel templates, and end-of-chapter questions with solutions

    The book contains a wealth of tools that makes it ideal for company training sessions and advanced undergraduate and graduate-level courses. For each major example provided, two similar problems are included—one for instructors to guide students through and a second for students to work through on their own. An additional set of problems and questions for testing purposes are also available to instructors on the authors’ website.

    Unfortunately, during the publishing process mistakes can be made that are not caught before the book is printed. Productivity Press takes great care to catch any errors prior to the printing stage.

    Why Is Lean Accounting Important?
    How Standard Costing Can Drive Wrong Behavior
    We Need to Show the Financial Impact of Lean Improvements
    We Need a Better Way to Understand Product Costs
    We Need New Kinds of Lean Performance Measurements
    We Need to Eliminate Waste from Accounting Processes and Systems
    We Need Better Ways of Making Decisions
    We Need to Focus Our Business around Customer Value
    Exercises and Discussion Questions

    Maturity Path to Lean Accounting
    The Maturity Path
    Getting Started with Lean Accounting
    Exercises and Discussion Questions

    Cell Performance Measurements
    What’s Wrong with Traditional Measurements?
    What’s Right with Lean Cell Measurements?
    BMA, Inc. Performance Measurement Starter Set
    Day-by-the-Hour Report
    First-Time-Through Report
    WIP-to-SWIP Report
    Operational Equipment Effectiveness
    Other Support Measurements in the Cell
    Presenting the Information
    Making the Cell Performance Measurements Work
    Nonproduction Cells and Departments
    Exercises and Discussion Questions

    Financial Benefits of Lean Manufacturing
    The Problem
    Creating the Box Score
    Managing Capacity
    Making Money from Lean Manufacturing
    Eliminating Wasteful Transactions
    What Must Be in Place?
    Cell Transactions
    Labor Tracking
    Material Costs
    Inventory Tracking

    Lean Financial Accounting
    A New Perspective on Internal Accounting Control
    Eliminating Waste from the Financial Accounting Processes
    Using Lean Tools to Create Change

    Managing by Value Stream
    What Is a Value Stream?
    Different Kinds of Value Streams
    Why Do We Focus on Value Streams?
    Why Should We Manage the Business through the Value Streams?
    Continuous Improvement
    The Maturity Path to Lean Value Stream Organization
    Problems and Issues
    How Do We Identify the Value Streams?
    Do We Need to Change Our Organization Chart?
    Develop a Plan

    Value Stream Performance Measurements
    What Is the Purpose of Value Stream Performance Measurements?
    Value Stream Continuous Improvement Teams
    Value Stream Measurements and Process Control
    How Do Value Stream Measurements Differ from Traditional Metrics?
    Box Scores
    Sales per Person
    Alternative Measurements
    On-Time Shipment
    Dock-to-Dock Time
    First Time Through
    Average Cost per Unit
    Accounts Receivable Days Outstanding
    Supporting Measurements
    Presenting the Information
    Making the Value Stream Performance Measurements Work

    Value Stream Costing
    What Is Wrong with Traditional Standard Costing?
    How Does Value Stream Costing Work?
    Why Is Value Stream Costing Simple?
    How Can We Implement Value Stream Costing?
    How Do We Handle Costs Outside the Value Stream?
    How Do We Know the Cost of a Product?
    Value Stream and Plant Profit and Loss Statements
    Calculating the Cost of Inventory
    Special Problems Involving Inventory
    Getting Started with Simpler Methods

    Using the Box Score
    Reporting Value Stream Performance
    Showing the Effects of Lean Improvements
    Showing the Effects of Strategies and Plans

    Calculating Product Costs—Features and Characteristics
    What Drives Cost in a Lean Value Stream?
    How to Use Features and Characteristics
    Uses of Features and Characteristics Costing

    Eliminating More Wasteful Transactions
    Labor Tracking
    Material Costs
    Inventory Tracking
    The Internal Control System
    Sales, Operational, and Financial Planning (SOFP)
    Purpose of Lean Sales, Operations, and Financial Planning
    Lean Financial Planning
    Lean Sales, Operations, and Financial Planning
    Value Stream Demand Planning
    Value Stream Operations Planning
    SOFP Planning Meeting
    Executive SOFP Meeting
    Variations on a Theme
    Making It Happen

    Lean Financial Accounting II
    Further Advances in Lean Accounting

    The Lean Enterprise
    What Is a Lean Enterprise?
    What Lean Methods Support the Wider Lean Enterprise?
    Why Are Lean Enterprises So Hard on Themselves?

    Target Costing
    How Does Target Costing Work?
    Where Is Target Costing Used?
    What Are the Steps We Take?
    After Step 3
    Target Costing at ECI, Inc.: Steps 1 through 3
    Understanding Customer Value
    Example of Target Costing at ECI: Steps 4 through 6
    Calculating the Target Costs
    Example of Target Costing at ECI: Steps 7 through 9
    Driving to Customer Value
    Example of Target Costing at ECI: Steps 10 through 12

    Expanding Value Streams Outside Our Four Walls
    The Lean Value Stream Revisited
    A Vision of the Expanded Value Stream
    Examining Value and Cost within Our Own Company
    Example of Effective Value Stream Expansion

    The Lean Accounting Diagnostic
    The Maturity Path Revisited
    Overview of the Diagnostic Tool
    Working with the Diagnostic Tool

    Performance Measurement Linkage Chart
    The Performance Measurement Framework
    Creating the Performance Measurement Starter Set
    Steps for Developing Performance Measures in Your Company

    Transaction Elimination Maturity Path Table
    How to Use the Maturity Path Table
    Transaction Elimination Process Maps

    Value Stream Cost Analysis
    What Is Value Stream Cost Analysis
    Performing the VSCA Calculations
    Step 1: Define the Value Stream
    Step 2: Analyze Capacity
    Future State
    Step 3: Simulate Uses of Capacity

    Value Stream Mapping
    Value Stream Maps and Lean Accounting
    More Value Stream Steps on the Value Stream Map
    Data Box Information


    Brian H. Maskell

    Praise for the New Edition:

    … a no nonsense approach to bringing continuous improvement to areas of the company not normally involved in the typical Lean implementation. Following the authors' guidelines has allowed us to create an entirely new way of looking at our company’s performance and has exposed many more opportunities for improvement that we never knew existed.
    —Roy St. Andre, Executive Vice President, EIS Wire & Cable Co.

    Practical Lean Accounting is a fantastic book, and the new edition is even better. This book makes a huge contribution towards understanding how to measure and manage a Lean enterprise. The addition of many new case studies and examples after each chapter, and more tools and practical information on the accompanying CD, makes the second edition worth buying again, even if you already have the first edition. Last, but not least, the book is even better suited for use in university accounting courses and in corporate Lean accounting training programs. … destined to have a big, positive impact on supporting organizations on their path to Lean management.
    —Professor Bob Emiliani, Central Connecticut State University

    Praise for the Bestselling First Edition:

    ... focuses on the key principle of Lean thinking, which is creating value for the customer. This focus highlights the need to measure financial progress from a perspective of relevant business issues and real cost instead of traditional standard cost methods. This is a much needed practitioner's book for the manufacturing industry.
    —J.T. Battenberg III, Chairman, CEO and President, Delphi Corporation, June 2004

    ... provides a very comprehensive and straightforward approach to this most difficult topic. A must read for the serious Lean practitioner.
    —Mark DeLuzio, President, Lean Horizons Consulting LLC, June 2004

    ... a highly readable and uncomplicated guide for financial and other managers of Lean companies and will no doubt become an invaluable reference for years to come.
    —Fred Garbinski, Parker Hannifin Corporation, June 2004