Lean Accounting

Lean Accounting 1
Advantages and Disadvantages of Lean Accounting
City & State
Lean Accounting 2
Lean Accounting is a method adopted by lean enterprises with the aim of eliminating
waste throughout the organization. It depicts the accounting system adjustments made by a
company to support lean production and thinking. Lean enterprises seek to eliminate waste, and
in the process, they can reduce the overall cost of production. Experts believe that lean
accounting contribute to profits rather than just calculating it. Lean accounting applies the lean
thinking in the organization. It focuses on customer value and empowerment of people within the
company. Additionally, it focuses the management of value streams while encouraging its
continuous motivation. It eliminates waste by incorporating control mechanism throughout the
production system hence, reducing cost. The introduction of this accounting system brought
various benefits to the organization that uses it. However, there are also disadvantages in the
application of this accounting system. This paper seeks to explore the advantages and
disadvantages of lean accounting (Maskell, et al., 2016, p. 1).
Lean Accounting method has been acclaimed as the most efficient method which focuses
on cost reduction. Application of lean accounting enables organizations to identify waste from
the production to distribution process. This is possible since lean accounting method applies
value stream costing collected on a weekly basis making it possible to point out waste and
eliminate them. Additionally, this technique leads to increase in sales for the company translating
to higher profit margin. This is possible since lean accounting techniques provide better
information for decision making. Lean-decision making and value stream allow timely decision
making. Moreover, this accounting method facilitates long-term lean improvement. This is
possible since this method applies the use of lean-focused information and measurements. These
include the application of visual management in which a single sheet of paper illustrates value
stream pointing out the operational performance, financial performance and the capacity in use.
Lean Accounting 3
This information allows effective decision making leading to achievement of organizational
goals (Abdulhussien, 2016, p. 12).
Nonetheless, there are limitations surrounding this modern accounting method, and it
restrictions its application in today’s organizations. The application of lean accounting method in
an organization requires employee training. The use of this method requires the involvement of
the entire workforce for it to succeed. Therefore, employee training becomes necessary leading
to massive expenditure, reducing profit margins. Additionally, lean accounting necessitates a
shift in management thinking as well as extensive cultural change within the organization. This
becomes a challenge given that organizational culture is the hardest aspect of change that can be
initiated by managers. Moreover, there is a tendency to resist the lean management approach
which comes with lean accounting system (Darabi, 2012, p. 40).
In conclusion, organizations have sought to develop strategies that will enable them to
remain competitive. This move has been motivated by the dynamics and competitive business
environment which keeps companies on toes to stay relevant. It is for this reason that firms have
adopted lean accounting system which seeks to eliminate wastage in the production process.
Lean accounting has its advantages for its efficiency in information generation enabling effective
decision making. However, it has limitations in its application since it requires massive
organizational change including change of corporate culture.
Lean Accounting 4
Abdulhussien, F. A., 2016. A Study on the Role of Lean Accounting to Reducing the Cost: At
Adani Power Company. International Journal of Research in Business Management, 4(9), pp. 9-
Darabi, R., 2012. Barriers to Implementation of Lean Accounting in Manufacturing.
International Journal of Business and Commerce, 1(9), pp. 38-51.
Maskell, B. H., Baggaley , B. & Grasso, L., 2016. Practical Lean Accounting: A Proven System
for Measuring and Managing the Lean Enterprise. 2nd ed. Boca Raton, Florida: CRC Press.

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