Lean Accounting

Lean Accounting
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Introduction
Lean accounting is a term that is used to refer to the changes that a company requires to its accounting, managements, control, and measurements in order to support the lean thinking and manufacturing processes. Most of the companies nowadays have embarked on the practice of lean manufacturing. The companies practicing lean manufacturing find it difficult to continue with their traditional accounting and management methods. This is because traditional management and accounting methods can only support the traditional methods of manufacturing. Traditional accounting methods were based on mass production thinking while the lean accounting method is based on principle of lean manufacturing.
The rise of lean accounting
In recent years, many organizations have changed the strategies they use in their productions. The companies have moved from large quantities of goods and services to producing individuals product that are adequate to meet the demands of consumers. The organizations have adopted a production system called lean manufacturing to help them avoid wastage that is associated with mass productions. The change from traditional production technique to lean production technique requires accounting changes in these organizations. The change requires companies to change their ways of controlling, measurement, and accounting of their production processes (Deluzio, 2006). Most companies will encounter problems in their standard accounting system when they shift to lean manufacturing techniques. The problem encountered is as a result of emphasis of traditional accounting method in promoting some behavior such as manufacturing large quantities, accumulating large inventories, hiding of waste and also focusing on the financial performance. These behaviors in traditional accounting method are in contradictions to the principle of lean manufacturing. Lean manufacturing requires the accounting method to focus on operational performance rather than financial performance.
Impact of lean accounting on the performance of companies
The concept of lean accounting has lead to improvements in the performance of several companies (Kennedy, and Brewer, 2005). Companies that have adopted lean accounting in their management practices have gained significantly with regards to their operations efficiencies.
Improvements in sales
Lean accounting often provides useful information that can be used by the management of companies to make decisions that can improve sales of various goods and services. The decisions that are based on traditional or standard accounting principle often leads to wrong decision making by managements of companies. Some of the common decisions that companies make during their operations include pricing, quoting, capital inve...