Lean Accounting Essay

Lean Accounting is described as “a general term used for the changes required to a company’s accounting, control, measurement and management processes to support lean manufacturing and lean thinking” (Maskell, n.d.). While one can look at the definition of Lean Accounting to understand, generally, what this term means, we must take an in depth look into the origins, history and development, principles and practices, benefits, problems, and financial impact of Lean Accounting for a complete understanding of this systematic accounting method. Lean manufacturing, also referred to as lean production, is the never ending effort to eliminate or reduce unnecessary material or activities from the manufacturing process if those processes consume resources
Businesses in the US, just as Toyota Company has done for decades, utilizes Lean management to reduce costs, reduce lead times, increase market shares, develop new products, improve quality of existing products and human resources (Emiliana, 2006). Importantly, Toyota has brought with the publication of their internal document in 2001, awareness to the “respect for people” principle, which has long been an unrecognized and misunderstood aspect of the Toyota Productions system or Lean management as practiced outside of Toyota Company (Emiliana, 2006). In order to precisely follow the Lean management objectives, a company must acknowledge and practice both principles, rather than just the first principle, “continuous improvement,” as it is the second principle that can limit the amount of improvement that can be achieved (Emiliana, 2006). Also worth noting, is that, although top executives today see the adoption of Lean management as critical, this topic is seldom seen in undergraduate and graduate business degree programs (Emiliana, 2006). When the application of both principles of Lean management takes place, this leads to the elimination of waste, called “muda” in Japanese (Emiliana, 2006). “Waste is defined as: activities and behaviors that add cost but do not add value as perceived by end-use customers,” with eight
With a Lean management system in place, an accounting system needs to be put in place to support the lean enterprise. The traditional accounting system is anti-lean due to: being large, complex and wasteful process that require non-value work, them having no efficient way to identify the financial impact of lean improvements taking place within a company, and them providing measurements and reports regarding labor efficiency and overhead absorption which motivate mass production and high inventory levels (Maskell, 2006). Lean accounting is an accounting method where the reduction of waste in the accounting process is the objective (Kapanowski,