November 01, 2006

Overcoming Accounting Challenges in Lean Transformation: A Discussion on Lean Accounting - LeanBlog Podcast Featuring Jim Huntzinger *

24 minutes

Show notes: https://www.leanblog.org/8

Remastered June 2021

Here is LeanBlog Podcast #8, an interview with Jim Huntzinger, the President of the Lean Accounting Summit.

In this Podcast, we will talk about the notion of “Lean Accounting” and some of the ways that traditional cost accounting and managerial accounting can come into conflict with our lean transformation efforts.

You might think, “I'm an engineer, what do I need to know about accounting?” But trust me, you need to learn about this topic so you can understand what drives some of the decisions your management might make and how they might need to change their approach to be more compatible with lean.

1:45 Jim gives an intro to lean accounting: leaning out accounting versus “accounting for lean”.

3:20 First experiences with inaccurate standard costing systems and how that was driving

bad business decisions, distortions through overhead allocation.

6:20 What bad decisions were being made through the lean journey – make/buy decisions.

6:30 How can you know how inaccurate your costing is without knowing exactly what the

cost is?

7:15 The fundamental math of most accounting systems is wrong, so you're automating a bad calculation.

7:50 What about the impact of inventory reductions being treated as a reduction in assets on the balance sheet? We still need to educate companies about this even after all this time working with lean.

9:00 Prof. Tom Johnson and his books

9:15 Some warnings about accounting go back to the start of the Industrial Revolution, that it could be used for incorrect decision making… you need to make decisions based on an intimate knowledge of the product.

9:35 What is the impact of having many large major manufacturers being run by “finance people”?

11:25 Again, accounting should be a support function for decisions you've made, rather than being the driving function of decisions.

13:30 Is it easier as a private company if you can ignore Wall Street and your stock price?

14:50 Some public companies have been successful with the long-term thinking… it comes down to leadership and leadership educating their boards and why the changes are good in the long term.

15:33 Who are the success stories heard about at the Lean Accounting Summit? Almost anyone working with lean accounting is on the cutting edge.

17:20 Over 500 attendees at the Summit this year, more than doubled from 2005.

18:15 “Thought leaders” or “Learning leaders”?

19:10 There's a good mix of very large public companies down to very small privately held companies attending the Summit, a variety of industries (manufacturing and healthcare),not just the U.S.

20:15 Plans for the 2007 Summit

20:50 Will also have a “TWI” summit (Training Within Industry) – a topic for a future podcast, maybe

21:42 Training Within Industry: The Foundation Of Lean

22:50 Other lean accounting resources are on Jim's website, as well as the AME website.

...more

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By Mark Graban

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