The New Role of Finance and Accounts Team in a Lean Company-

The finance function transforms into a collaborative team who continuously partners with other functions for success in the implementation of the lean production system, daily management system and lean accounting.

? Operations – Accountants will become the finance business partner for continuous operational improvement projects and support through calculation of savings and review of operational improvement plans from a finance perspective.

? ?Procurement – The finance team will provide support through reduction in suppliers, vendor rating, outsourcing decisions, simplifying accounts payable, stock taking and cycle stock take.

? ?Sales and Marketing – Accountants will move away from calculating product cost using allocations, which is misleading and prone to wrong decision-making, and start using value stream-based product costing and simplify accounts receivable.

? ?Human Resources – Accountants will drive the implementation of a reward and recognition scheme in collaboration with HRD.

? ?Corporate, Functional, Performance Scorecard and Skill Matrix Implementation – The finance team will replace old measures with new measures that add value to the lean implementation journey. They will frame and implement the lean performance measurement system for all functions and coordinate the scorecard readiness for presentation in the monthly review meeting to provide meaningful and timely information.

? ?Financials – The finance team will replace standard cost accounting with value stream-based costing for better cost management and implementation of lean accounting across the company.

? ?Prepare Annual Budget – The finance team will prepare month-wise and function-wise budgets for the current year for easy understanding by the functional managers and projected budget for next three years. Since finance personnel now understand the operational aspect of manufacturing, they can provide proactive suggestions for reduction in waste and cost of manufacturing. They can eliminate complexity from the financial statements and prepare the P&L statement as per lean accounting, which would be useful for all functional managers.

? ?One-Day Closing – We live in a world of instant gratification. If we can obtain real-time information about the weather, current news, stock market, banking and so forth, the company can also aim for one-day closing (i.e., preparing the P&L on the first day of the following month).

The importance of one-day closing can be determined by how much time, effort and cost goes into month end closing activity. The cost of preparing the P&L can be computed by identifying how many accountants work on preparing the P&L, how many days they take and how much are their salaries. This would be a significant amount but is it worth it if the month end reports are prepared after a week of previous month? It is too late to be of any value because costs have been incurred and plans have been made for the new month. The operations function has moved ahead and is busy tackling new challenges of the current month without any improvement on obstacles of previous month. The problem persists, the costs are still high and the sales are still low.

In order to initiate one-day closing, start by closing every day of the month. The variable costs add up every day. Post the approved bills on the same day and ensure no bills are pending. Keep corporate costs, payrolls, warranty and depreciation updated. Fixed costs do not change much month to month and can be updated in advance. Leave as few items for the closing window as possible like sales revenue, material costs and closing inventory, the first two entries in the P&L statement for the last day. Month-wise financial performance should highlight what improvements have been achieved and the focus should be on partnering with the function teams to make them understand the mon- etary value of their activities.

? ?Capacity Calculations – The finance team should lead the capacity calculation to highlight opportunities for increase in production or business expansion. It should also lead the preparation and updation of the corporate scorecard for each function every month along with the functional teams and value stream managers.

? ?Transaction Elimination – Identification and elimination of transactions across the company along with the functional teams and value stream managers will be one of the key objectives of the finance team in the new lean environment.

? ?Lean Assessment and Audit – Accountants have to lead with operations teams in conducting a ‘lean production system, daily management system and lean accounting system’ assessment audit along with the functional teams and value stream managers.

? ?Lean ERP – Accountants have to lead with operations teams in implementing lean ERP changes along with the functional teams and value stream managers.

? ?Conduct Monthly Budget Review Meeting – The finance team will help to conduct this meeting to discuss performance of the previous month, orders for the financial year, reasons for shortfall of manufacturing and dispatch value, if any, inventory status, status of scorecards for all func- tions, financial review for the month and course correction for the next month and quarter.

The role of ‘finance and cost accountants’ are totally transformed from the earlier ‘book-keeper’ status to active members of the continual improvement projects teams.

This and much more is in the “The Lean Business Guidebook – How to Satisfy Your Customers and Maximize Your Profit?”?Authors-MJS BINDRA and EKROOP KAUR with 482 pages, 78 exhibits in 18 chapters. The recommended methodology can be suitably modified for use in your company for implementing Lean Accounting.

?Published by Routledge: Taylor & Francis Group: Productivity Press: New York NY in paperback, Hardback and eBook.

?Please order your copy on the Links shared below: Routledge,: https://lnkd.in/dNXXe_S4; Taylor and Francis: https://lnkd.in/dFjP5sKC;

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