Table of Contents

Chapter 1 - Overview of Lean Accounting. 1

The Definition of Lean. 1

Issues that Interfere with a Lean Department 2

Lean Tools. 3

Value Stream Mapping. 3

Flowcharts. 4

Accounting Run Charts. 5

Check Sheets. 6

Traffic Analysis. 6

Root Cause Analysis. 7

The Lean Culture. 8

A Note of Caution. 9

The Failure of Lean Initiatives. 10

The Structure of this Book. 12

Chapter 2 - Lean Customer Billing. 15

Improvement Concepts. 15

Billing Processing. 16

Billing Processing. 16

Analysis of Billing Processing. 16

Lean Billing Processing. 17

Evaluated Receipts System.. 17

Payment in Advance. 17

Systems Integration. 18

Buffer Staff 18

Invoice Layout Improvement 18

Complex Invoice Separation. 19

Invoice Proofreading. 20

On-line Invoice Entry. 20

Invoice Creation at Delivery Point 20

Invoice Creation at Shipping Dock. 21

General: Pricing Simplification. 21

Practices to Avoid. 21

Analysis of Lean Billing Processing. 21

Additional Improvement Concepts. 23

Billing Measurements. 23

Chapter 3 - Lean Cash Receipts. 26

Improvement Concepts. 26

Check Receipts Processing, Basic Process. 27

Check Receipts Process. 27

Analysis of Check Receipts Process. 27

Lean Check Receipts Processing (with Lockbox) 28

Bank Lockbox. 28

Automatic Cash Application. 28

Analysis of Lean Check Receipts Process (with Lockbox) 29

Lean Check Receipts Processing (without Lockbox) 30

Apply from Check Copies. 30

Remote Deposit Capture. 31

Conduct Daily Bank Reconciliation. 31

Analysis of Lean Check Receipts Process (No Lockbox) 31

Cash Receipts Processing. 33

Cash Receipts Process. 33

Analysis of Cash Receipts Process. 33

Lean Cash Receipts Processing. 34

Credit Card Receipts Processing. 34

Credit Card Receipts Process. 34

Analysis of Credit Card Receipts Process. 35

Lean Credit Card Receipts Processing. 35

Enter Information in On-line Form Immediately. 35

On-line Payment Apps. 35

Analysis of Lean Credit Card Receipts Process. 36

Cash Receipts Measurements. 37

Chapter 4 - Lean Accounts Payable. 40

Improvement Concepts. 40

Supplier Invoice Processing. 41

Supplier Invoice Processing. 41

Analysis of Supplier Invoice Processing. 42

Lean Supplier Invoice Processing – Complete Replacement 42

Evaluated Receipts Processing. 43

Pay from Receipt 43

Analysis of Lean Supplier Invoice Processing. 44

Lean Supplier Invoice Processing – Incremental Improvement 45

Procurement Cards. 46

Supplier Entry of Invoices. 46

Direct Invoice Delivery. 46

Invoice Numbering Convention. 46

Incoming Invoice Scans. 46

Request Aggregated Invoice. 47

Approval Minimization. 47

Expense Report Auditing. 47

Expense Report Outsourcing. 47

Form W-9 Requirement 48

General: Centralize Accounts Payable. 48

General: Supplier Reduction. 48

General: Vendor Master File Examination. 48

General: Supplier Naming Convention. 48

Practices to Avoid. 48

Analysis of Lean Supplier Invoice Processing. 49

Check Payment Processing. 50

Check Payment Processing. 51

Analysis of Check Payment Processing. 51

Supplier Payment Processing, Lean Approach. 51

Recurring Payment Automation. 52

Manual Check Reduction. 52

Signature Stamp or Plate. 52

ACH Payments. 52

Practices to Avoid. 53

Analysis of Lean Supplier Payments Processing. 53

Additional Improvement Concepts. 54

Accounts Payable Measurements. 55

Chapter 5 - Lean Payroll 58

Improvement Concepts. 58

Payroll Data Collection. 59

Timecard Data Collection. 59

Analysis of Payroll Data Collection. 60

Lean Payroll Data Collection. 60

Convert Hourly to Salaried Pay. 60

Data Collection Minimization. 61

Computerized Time Clocks. 61

Web-Based Timekeeping. 62

Smart Phone Time Tracking. 63

Copy Forward Hours Worked. 63

Automated Time Tracking Reminders. 63

Analysis of Lean Payroll Data Collection. 64

Commission Processing. 65

Commission Processing. 66

Commission Processing Analysis. 66

Lean Commission Processing. 66

Commission Plan Simplification. 67

Standard Commissions Report 67

Incentive Compensation Management Software. 67

Analysis of Lean Commission Processing. 68

Payroll Processing. 69

Payroll Processing. 69

Payroll Processing Analysis. 70

Lean Payroll Processing. 70

Payroll Cycle Duration. 70

Off-Cycle Payroll Elimination. 71

Outsource Payroll Processing. 71

Payroll Data Entry by Employees. 72

Payroll Data Entry by Managers. 72

General: Prohibition of Employee Advances. 72

General: Prohibition of Reimbursements through Payroll 73

General: Reduction of Pay Deductions. 73

General: Combine Payroll Systems. 73

Analysis of Lean Payroll Processing. 73

Employee Payment Processing. 74

Employee Payment Processing. 74

Analysis of Employee Payment Processing. 75

Lean Employee Payment Processing. 75

Direct Deposit 75

Pay Cards. 76

General: On-line Access to W-2 Forms. 76

Analysis of Lean Employee Payments. 76

Additional Improvement Concepts. 78

Payroll Measurements. 78

Chapter 6 - Lean Financial Statements. 81

Improvement Concepts. 81

How Financial Statements are Usually Produced. 82

The Production of Financial Statements. 82

Analysis of Financial Statement Production. 83

Lean Financial Statements. 84

Financial Statement Avoidance. 84

Task Interdependency Analysis. 85

Correct Errors Early. 86

Reconcile Accounts Early. 87

Adjust Reserves Early. 87

Alter Overhead Allocations Early. 87

Review the Shipping Log Early. 88

Review Billable Hours Early. 88

Accrue Early. 88

Accelerate Depreciation Calculations. 89

Examine Commissions Early. 89

Standardize the Accounting System.. 90

Centralize the Accounting System.. 91

Centralize Travel Bookings. 92

Process Centering. 92

Mitigate Information Dependencies. 93

Standardize the Report Layout 93

Reduce the Financial Statements. 94

Collect Report Information Early. 94

Electronic Delivery. 95

Defer Activities. 95

Automation Solutions. 95

Ongoing Process Improvements. 97

Analysis of Lean Financial Statements. 99

Financial Statement Measurements. 100

Chapter 7 - Lean Credit Management. 103

Improvement Concepts. 103

The Credit Management Environment 103

Traditional Credit Process. 103

Analysis of Credit Management 104

Lean Credit Management 104

Credit Granting Consistency. 105

Terms of Sale Consistency. 106

Complete Information Gathering. 106

Ongoing Information Gathering. 107

Behavioral Trigger Analysis. 107

Skew Credit Terms. 108

Contact New Customers. 108

Shift Risk to Credit Insurance. 108

Analysis of Lean Credit Management 109

Additional Improvement Concepts. 109

Credit Measurements. 109

Chapter 8 - Lean Collections. 112

Improvement Concepts. 112

The Collections Environment 112

Traditional Collections Process. 113

Analysis of Collections. 113

Lean Collections. 113

Payment on Receipt by Customers. 113

Payment in Advance. 114

Payment by ACH Debit 114

Focus on Large Dollar Invoices. 114

Accelerate Small Write-offs. 115

Increase Collection Staff Efficiency. 115

Notify Sales Staff 116

Contact New Customers. 117

Problem Resolution Working Group. 117

Prevent Deductions. 118

Accelerated Escalation. 118

Practices to Avoid. 119

Analysis of Lean Collections. 119

Additional Improvement Concepts. 119

Collection Measurements. 120

Chapter 9 - Lean Inventory Accounting. 122

Improvement Concepts. 122

The Inventory Accounting Environment 123

Traditional Inventory Accounting. 123

Analysis of Inventory Accounting. 123

Lean Inventory Accounting. 124

Perpetual Inventory System.. 124

Cycle Counting. 124

Transaction Backlog Elimination. 125

Bar Coded Inventory Transactions. 125

Backflushing. 126

Ending Inventory Estimation. 126

Minimal Overhead Allocation. 127

Lower of Cost or Market Limitation. 127

Obsolete Inventory Tracking. 127

Charge Inventory to Expense. 128

Just-in-Time Deliveries. 128

Drop Shipping. 129

On-Site Inventory Ownership by Suppliers. 129

Reduce Product Options. 130

Analysis of Lean Inventory Accounting. 130

Additional Improvement Concepts. 130

Inventory Measurements. 131

Chapter 10 - Lean Cost Accounting. 134

Improvement Concepts. 134

The Cost Accounting Environment 135

Traditional Cost Accounting – Variance Analysis. 135

Traditional Cost Accounting – Job Costing. 135

Traditional Cost Accounting – Inventory Valuation. 135

Traditional Cost Accounting – Margin Reports. 136

Analysis of Cost Accounting. 136

Lean Cost Accounting. 137

Cost Derivation with Backflushing. 137

Terminate Labor Tracking. 138

Terminate Materials Usage Tracking. 138

Terminate Variance Reporting. 138

Minimize Overhead Allocation. 139

Pull System.. 139

Terminate Work Orders. 140

Cell-Level Measurement Systems. 140

Constraint Analysis. 140

Target Costing. 142

Analysis of Lean Cost Accounting. 143

Additional Improvement Concepts. 143

Cost Accounting Measurements. 144

Chapter 11 - Lean Fixed Asset Accounting. 147

Improvement Concepts. 147

The Fixed Asset Accounting Environment 147

Traditional Fixed Asset Accounting. 148

Analysis of Fixed Asset Accounting. 148

Lean Fixed Asset Accounting. 148

High Capitalization Limit 149

Minimal Base Unit Aggregation. 149

Minimum Number of Asset Classes. 150

Minimum Limit on Salvage Values. 150

Interest Capitalization Avoidance. 151

Common Depreciation Method. 151

Annual Fixed Asset Audit 151

Fixed Assets Manual 152

Formal Documentation. 152

Analysis of Lean Fixed Asset Accounting. 153

Fixed Asset Measurements. 153

Chapter 12 - The Lean General Ledger Environment. 155

Improvement Concepts. 155

The General Ledger Environment 155

Number of Accounts. 156

Mapping. 156

Journal Entries. 156

Account Contents. 157

Analysis of the General Ledger Environment 157

The Lean General Ledger Environment 157

Account Reduction. 157

Meaningful Account Codes. 160

Standardized Chart of Accounts. 160

Journal Entry Restriction. 161

Journal Entry Checklist 161

Journal Entry Templates. 161

Recurring Journal Entries. 162

Account Content Review.. 162

Practices to Avoid. 162

Analysis of the Lean General Ledger Environment 163

General Ledger Measurements. 163

Chapter 13 - Lean Budgeting. 165

Improvement Concepts. 165

The Budgeting Environment 165

Control Basis. 166

Behavioral Impacts. 166

Bureaucratic Support 167

Information Sharing. 167

Inaccuracy. 167

Analysis of the Budgeting Environment 168

A More Lean Approach to Budgeting. 168

Error Checking. 168

Summarization Comparison. 169

Verification Rules. 170

Capacity Verification. 170

Step Cost Verification. 171

Cash Flow Verification. 172

Budget Simplification. 172

Budget Procedure. 173

Budget Pre-loading. 173

Analysis of the More Lean Approach to Budgeting. 173

The Ultimate Lean Budget 174

Operating without a Budget 174

Forecasting without a Budget 175

Capital Budgeting without a Budget 176

Goal Setting without a Budget 176

Compensation without a Budget 177

Analysis of the Ultimate Lean Budget 178

Summary. 178

Chapter 14 - Lean Filing. 181

Improvement Concepts. 181

The Traditional Filing Environment 181

The Filing Environment 182

Analysis of the Filing Environment 182

The Lean Filing Environment 182

Report Purge. 183

Copy Elimination. 183

Individual Folder Creation Policy. 183

Record Pre-Sorting. 183

Document Destruction Policy. 183

Off-Site Storage. 184

Filing Cabinet Locations. 184

Filing Carts. 184

Longer Archiving Intervals. 185

Storage Improvements. 185

Document Imaging. 185

Document Consolidation and Clarification. 186

The Tickler File. 186

Mis-Filing Solutions. 186

Practices to Avoid. 187

Analysis of the Lean Filing Environment 187

Chapter 15 - Lean Controls and Procedures. 190

The Genesis of Accounting Controls. 190

The Proper Balance of Control Systems. 191

The Nature of Risk. 192

Common Fraud Risk Factors. 193

Control Principles. 194

The Failings of Internal Controls. 196

Special Case - Acquisitions. 196

Special Case – Employee Turnover 197

Special Case – Rapid Growth. 197

Terminating Controls. 198

The Nature of a Procedure. 198

The Need for Procedures. 199

The Number of Procedures to Develop. 200

Answers to Chapter Questions. 203

Glossary. 229

Index. 234

 

Final Examination………………………………………………………………………………………………….240