The Financial Controller and CFO's Toolkit, 3rd Edition

Chapter 15Lean Accounting

OVERVIEW

The lean movement gave the impetus for a new look at accounting called lean accounting, which had its beginnings around 2004. Lean accounting offers the accountant many profound insights. This chapter explores streamlining the chart of accounts, questions the validity of cost apportionment and activity-based costing, outlines value-stream accounting, demonstrates the danger of absorbing overhead and labor into closing WIP and finished goods, and revisits product costing.

The lean movement gave the impetus for a new look at accounting called lean accounting, which started around 2004. Lean accounting offers the accountant many profound insights and will improve the way we report costs. Lean accounting has progressed to such an extent that there is now an annual lean accounting summit. The key writers in this space include:

• Jeremy Hope¹
• Brian Maskell and Bruce Baggaley²
• Orest Fiume and Jean Cunningham³
• Frances Kennedy⁴

STREAMLINING THE CHART OF ACCOUNTS

The chart of accounts is where many problems start. The complex GL packages have made a serious misjudgment with regard to the need for myriad accounts. The financial controller and CFO need to be alert to the problems of a large chart of accounts.

Limit the P & L to Fewer than 60 Account Codes

Show me a company with fewer than 60 account codes for its profit and loss statement (P & L) and I will show you a CFO or financial controller who has seen the light. However, I have seen many ...