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The Lean CFO: Architect of the Lean Management Accounting System

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This book is not about debits, credits, or accounting theory. It’s about how a chief financial officer (CFO) becomes a Lean CFO to lead the transformation of a company’s management accounting system into a lean management accounting system.

It’s been well established in lean companies that traditional management accounting systems do not provide relevant and reliable information to decision makers. The CFO, as steward of a company’s management accounting system, must provide the leadership to improve the quality of the information produced by a company’s management accounting system so it is aligned with a company’s lean strategy, lean operations, and continuous improvement.

The integration of a lean management accounting system with a company’s lean strategy will lead to improved decision making by all users and drive long-term financial success. Lean management accounting helps all users, from executives to line managers, better understand the relationships between lean operating performance and financial performance.

Written in the style of a practice guide, The Lean CFO is written not just for CFOs, but for all stakeholders of a company’s management accounting system, such as executives and owners, lean leaders, functional managers, and accounting professionals.

Author(s): Nicholas S. Katko
Edition: 2
Publisher: Routledge/Productivity Press
Year: 2023

Language: English
Pages: 193
City: New York

Cover
Half Title
Title Page
Copyright Page
Table of Contents
Preface to the Second Edition
About the Author
1 The Lean Management Accounting System
2 Leading a Lean Management Accounting Transformation
Become the Role Model
Integrate Lean Management Accounting Into the Lean Strategy
Use Lean Practices as the Foundation for the Transformation
Customer Value
Continuous Improvement
Use PDCA
Focus On Thinking
Start With Pilots
Wrap Up: You Are the Head Coach
3 Lean Is the Strategy
Introduction
Lean Is the Strategy
Customer Value
A Lean Strategy Is Principle-Based
Value Stream Organization
Continuous Improvement = People Solving Problems
No Standard
Troubleshooting
Gap From Standard
Improving the Standard
Lean Operating Practices
The Economics of Lean
Wrap Up – Lean Is the Strategy
4 Lean Performance Measurements
Lean Performance Measurement Cycles
What to Measure
Daily Or Cell Lean Performance Measurements
Schedule Attainment
Quality
Cost
Flow
Safety
Respect for People
Weekly Or Value Stream Lean Performance Measurements
Delivery
Quality
Lead Time
Flow
Productivity
Cost
Safety and Respect for People
Monthly Or Company Lean Performance Measurements
The Linkage Chart Process
Develop the Linkage Chart
Pilot the Measurements
Review and Adjust the Measurements
Linkage Chart Development Plan
Wrap Up – Lean Performance Measurements
5 Measuring Capacity
Time Is Money
The Economics of Lean
Types of Activities
Value Added Activities
Non-Value Added But Necessary Activities
Non-Value Added and Wasteful Activities
Process Analysis and Data Collection
Data Collection Methods
Data Collection On Process Activities
Data Collection On Position Activities
Example: Measuring Capacity By Process Activities
Example: Measuring Capacity By Position Activities
Frequency of Measuring Capacity
Wrap Up: Time Is Money
6 Value Stream Income Statements
GAAP = GAAH!
Purpose of Value Stream Income Statements
Value Streams Are Profit Centers
Value Stream Income Statement Practices
Practice 1: Simple Format
Practice 2: Report Actual
Practice 3: Properly Define Variable and Fixed Costs
Practice 4: Avoid Cost Allocations
Designing a Value Stream Income Statement
Sales
Variable Costs
Contribution Margin
Fixed Costs
Value Stream Operating Margin
Shared Costs
Value Stream Operating Profit
Designing a Company Value Stream Income Statement
Wrap Up
7 Value Stream Management
Introduction
Planning the Value Stream – Strategy Deployment
The Plan Step
The Do Step
The Check Step – Catchball
The Adjust Step
Improving the Value Stream – Continuous Improvement
Planning the Improvements
Do – Conducting Kaizen Events
Check and Adjust – the Weekly Value Stream Team Meeting
Controlling – Daily Lean Management
Plan and Do – the Daily Schedule and Executing the Work
Check and Adjust – the Daily Huddle
Managing – Accounting’s Role in Value Stream Management
Wrap Up: Value Stream Management
8 Lean Decision Making
Box Score Thinking
Use the PDCA Process
Increasing Capacity to Meet Demand
Make Or Buy Decision
Pricing and Quoting Decisions
Lean Cost Management Decisions
Labor Cost Management
Machine Cost Management
Material Cost Management
Material Price
Wrap Up: Lean Decision Making
9 Dealing With Standard Costing: Simplifying Standard Setting
Introduction
Standards Are Static, Lean Is Dynamic
Simplifying Material Standard Setting
Reducing the Number of Bills of Material
Reducing the Number of Part Line Items
Improving Quantity Per Assembly
Improving Material Cost
Simplifying Labor and Overhead Standard Setting
Impact of Lean Practices On Routers and Rates
Reduce Number of Labor and Overhead Rates
Simplify Run Rates
Reduce Number of Work Centers
Strive for One Labor and One Overhead Rate
Wrap Up – Simplify Standard Setting
10 Dealing With Standard Costing: Transaction Elimination
ERP and the CFO
Traditional Manufacturing and ERP
Lean Manufacturing and ERP
Reducing Work Order Transactions
Stop Reporting Actual
Begin Backflushing
Reduce Router Steps
Decrease Number of Work Orders
Reducing Material Control Transactions
Reducing Receiving Inspection Transactions
Reducing Inventory Adjustments and Cycle Counting Transactions
Wrap Up: Transaction Elimination
11 Dealing With Standard Costing: Lean Inventory Valuation
Introduction
GAAP and Inventory Valuation
Lean Inventory Valuation and GAAP Compliance
Lean Inventory Valuation of Material
Lean Inventory Valuation of Actual Production Costs
Average Production Costs
Historical Margin
Getting Started With Lean Inventory Valuation
The Benefits of Lean Inventory Valuation
Wrap Up: Lean Inventory Valuation
Appendix
Index