The Lean Accounting Movement introduced some groundbreaking changes in how we measure, report and plan for organizational costs…
Budgets are bad… rolling forecasts allow us to take away the cliff mentality and intend to provide a platform on which we can become nimbler.
Move away from full-absorption cost accounting and allocation of “monuments” to a model designed to measure “economic value added.”
Visual process and value-stream measurement, allowing everyone to see how an end-to-end process is performing, enabling timely response and adjustments to help both customers and productivity.
These are great concepts, AND we have an opportunity to continue to mature our thinking.
Let’s start with rolling forecasts.
In many organizations, rolling forecasts are implemented in a way that allows functional managers to treat the process as if it were just a rolling budget with a mindset of “use it or lose it.”
“How many budget owners have the mentality that we need to keep people busy?”
In addition, forecasting resource allocations are still largely accomplished along the existing functional silos, which counters the intended gain: to enable agile deployment of resources to the most strategic, value-adding activities across the organization.
Allocations are always a difficult topic!
An important aspect of allocations that received less focus in the lean accounting literature are those that happen at a corporate level, representing shared services or other “corporate function” costs.
By definition, these allocations send cost structures to budget control centers and “would be” decision makers without them having the opportunity to control or speak into the spending or management of that function. In essence, this moves key decisions to the finance function, actually weakening the ability for managers to be truly held accountable for their overall business/financial results.
We need to GROW decision making muscle, not weaken it!
In addition, we cannot consistently allow such cost overruns to accumulate, be charged out and fail to effectively deal with how or why they occurred. Consider the potential for capability development within our finance teams.
“Are we enabling our finance teams to develop the level of business acumen needed to allow them to be a value adding resource to the business owners?”
Many are lost in the details, the debits and credits, the cost allocations, the budget constraints… they are sitting on a mound of information, but many do not have the strategic perspective to know how to extract meaningful value from that data, or how they themselves can add value to the ultimate customer of the business.
Business insights are needed, and the accounting and finance processes should serve to inform and enable rapid, value-based, strategic resource allocations.
To learn more about financial strategy and LEAN accounting with the Convene consulting platform, just click here. You will find a variety of consultants that can meet with you in person or online.
About the Author
Marita's 30-year career brings a unique skill set as an experienced CFO / CPA with financial analysis expertise, Enterprise / Information Systems knowledge, and Lean Six Sigma Black Belt experience in transforming operations. Combined, this enables her to assist business owners in tackling their challenges and growing profitably. Through her expertise as a wealth advisor and personal financial specialist (CKA®, CLTC®) she can advise regarding the most impactful ways to utilize your and your company's wealth.