Organizational Objectives: The Lean Accounting Method

Another tool and technique to achieve organizational objectives is the lean accounting method also known as lean management. “Lean management is a system derived from Toyota’s lean manufacturing methodology, which systematically aims to reduce waste, improve workflows and eliminate non-value-adding activities. This ultimately creates more value for customers, with fewer resources” (CGMA, n.d.). Lean management techniques and lean production has similar benefits. So, activities that is unsuccessful in adding value will be deemed as a waste, including wasted effort. Moreover, lean management can cause significant saving of costs in regards to labour intensive service industry by minimizing staff levels and removing errors. However, organization

Maskell and Baggaley (2005) explains that lean accounting can be summarized and segregated into five principles which are lean and simple business accounting, accounting process supporting lean transformation, communication of information which are clear and timely, lean perspective planning and strengthen internal accounting control. Lean and simple business accounting can be stated as "applying lean methods to the accounting processes" (Maskell & Baggaley, 2005). Accounting process can be segregated into two types; namely the type where there are wastes that cannot be eliminated at the moment and the type where wastes can be eliminated. Therefore, lean accounting is done by continuously eliminating wastes from reports, processes and accounting methods in an organization. According to Maskell and Baggaley (2005), this could be acquired by kaizen, value stream maps and Plan-Do-Check-Act (PDCA) problem solving approach. Furthermore, accounting process supporting lean transformation is a principle which emphasise on continuous

Based on the value stream level and lean accounting information, these plans are made. Strengthening internal accounting controls is the fifth principle which is important because it exposes auditors towards lean accounting process at an early stage. Maskell and Baggaley (2005) explains that “a primary tool to ensure that Lean Accounting changes are made prudently is the Transaction Elimination Matrix.” Using this matrix, lean methods to be used can be determined to allow the elimination of traditional transaction based processes without bringing negative impact to financial or operational control. The new Sarbanes Oxley regulations (SOX) are met by including SOX requirements in the standardized work whenever improvement projects are applied to the company 's administrative processes (Maskell & Baggaley, 2005). SOX risks are included and colour-coded and any changes needed to alleviate and test the risks are constructed into kaizen event or improvement project when the process maps are