Lean Accounting Simplified

We all know, change is the rule of world. In this world, we see everything is changing. So, accounting is also not an exception of this. Lean accounting is also a new system of accounting which is trying to modernization of accounting.

What is Lean Accounting?
What is the Aim of Lean Accounting?
What are the Tools of Lean Accounting?

What is Lean Accounting?

Lean accounting is the support to the business by controlling the waste, loss and defects. Instead of using old accounting methods like each transaction recording, standard costing, ABC, variance, it is fully dedicated  to measure the performance and to increase it at low cost.

In simple words

1. It gives time to measure the performance. For example, businessman is interested to know the sale per employee instead of time taken. Just recording the time of employee is not important if he does not achieved the target. We have to take decision to promote and to demote on the basis of performance of employee. So, lean accounting will record the performance and left all other work.

2. Lean accounting will also do best to explain the financial statement in simple words.

3. It is the value base accounting. Today time is the time of value. For example, we can take the example of a salesman who sells the products on the mobile. When he will talk to you, you can note the value in his words. Suppose, he want to sell gold loan to you. If he will talk useless for half hours, it will be the big loss of your time value and money cost if it is under roaming.

What is the Aim of Lean Accounting? 

One of aim of lean accounting is for better wholesale marketing price decision. In the interview, Lean consultant Bill Waddell explained same. Watch following video.

What are the Tools of Lean Accounting?

Following are the main tool of lean accounting.

1. Value Stream Costing

In lean accounting, we make weekly cost reports for better decisions. Company appoint value stream manager who is accountable for cost and profitability.

2. Box Score

In lean accounting, we use the box score for presenting the financial and non-financial information in a sheet.

Following is its example:

In above box score, we are seeing that three type of performance is measuring. One is operational, second is capacity and third is financial. By reading this sheet, we can easily compare with our target, so it is helpful for good decision making which is the main aim of accounting.

3. Target Costing 

Target costing is that tool of lean accounting in which every increase in the cost of product is compared with the customer's satisfaction of customer. Main aim of establishing target cost is to give maximum value to the customer.







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Accounting Education: Lean Accounting Simplified
Lean Accounting Simplified
Accounting Education
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