9 Things to Look For in Lean Accounting Software for Manufacturers

I attended the Lean Accounting Summit in Orlando last September, and I’m still struck by the totally different attitudes of companies that choose lean transformation versus conventional non-lean companies. Lean thinking certainly isn’t new to the business community, but many managers and business influencers still have no clear understanding of lean. They typically pick and choose their lean manufacturing tools, and ignore other lean principles that contribute to success, if not playing an even more vital role. One example of such overlooked principles: lean accounting.

The problem is that lean transformation quickly collides with existing accounting practices—and the sooner a business realizes this, the better. Clearly, you cannot improve during your lean transformation journey without transforming your accounting (and your accounting software in particular).

Specific requirements for lean accounting software differ from regular financial and accounting systems. So what makes lean accounting software systems different? And what factors and functionality should businesses consider when selecting accounting packages for lean environments?

Based on the information I gathered during the summit, there are nine major functional requirements for a lean manufacturing business:

1. The software must be capable of handling accounting processes according to value streams. This includes value-stream mapping, and value-stream–based metrics, income statements, cost numbers, profitability, and capacity analysis. Since value streams for each company or subdivision are unique, the software should be flexible enough to accommodate all possible value-stream definitions and to make necessary changes down the road if required.
2. In addition to traditional costing methods, lean accounting software should be able to support alternative costing techniques, such as value-stream costing, kaizen costing, and target costing.
3. The software must support lean inventory valuation tools, including the possibility of switching to simple, visual, and even non-computerized inventory accounting tools.
4. Since lean manufacturing environments maintain and control significantly fewer transactions, lean accounting software should support adequate step-by-step transaction elimination without losing overall control of business processes. At the same time, it should still allow accountants to provide the financial reports required for compliance.
5. Analytical and reporting mechanisms that are flexible and easy to create, customize, and maintain must be included in the package. The ability to create and maintain non-standard (for conventional accounting) reports and custom-made visual summaries (such as box scores), or various types of performance measurement, is vital in a lean accounting environment.
6. The software must support lean-based planning tools and techniques, such as 18-month rolling sales, operations, and financial planning processes on a regular basis.
7. Continuous improvement, which is one of the core ideas of lean business, implies regular changes to business processes and procedures. Accounting software must be flexible enough to rapidly adapt to business changes on a regular basis.
8. Traditional financial and accounting reports are still required by governmental and fiscal authorities, which means that the ability to support lean and traditional reporting in parallel is another important function of lean accounting software. In this case, lean reporting plays a role for the managerial reporting structure that is independent of mandatory statements.
9. A simple graphical user interface that allows users to learn the system quickly and work effectively is an essential attribute of software designed for lean environments. This can be certainly applied to any software in general, but it is particularly important in the lean approach. In addition, the system’s architecture should allow easy modification of the interface, the system’s appearance and, sometimes, business processes.

Accounting should support lean transformation and not be an end in itself. The whole idea of light, fast, and adequate accounting that facilitates business development and provides all employees with access to financial and other results in a clear and visual way is the cornerstone of the ideal lean accounting software.