Customer Reviews

Real Numbers: Management Accounting in a Lean Organization

5 star:		(7)
4 star:		(2)
3 star:		(1)
2 star:		(0)
1 star:		(0)

 

 

The book's presentation makes a case for accurate and timely information that is easily understood and actionable. Whereby it is now time to take the benefits learned from implementing lean manufacturing on the shop floor into the office and remove the blinders of old traditional accounting systems. Doing so transforms the accountant from bean counter to a valued partner in the business.

Discussions include:

* a strong section on performance measurement - what the financial team should be measuring in place of current traditional accounting reports.

* how to streamline the process and bring about meaningful change

* a practical methodology for making the transition away from cost accounting - to go from micro accounting to macro accounting

* plain English management financial systems - what they are, why to use, benefits, and how to get them using the one day close method

* new concepts in budgeting (the lean budget) and capital planning whereby one looks at reduction in inventory and flexibility instead of per part cost

* lean acquisitions - what to do with all that new found cash

The final three chapters are my favorite where Jean and Orest take their boardroom management skills and depart wisdom to the reader. Here it is explained why the CEO and CFO must become active leaders, the benefits of breaking from tradition, and the twelve principles of lean accounting.

This is a must read book for everyone who wants to shed the role of bean counter or who has struggled with bean counters and their misunderstanding the accounting side of lean manufacturing.

Rick Anderson
President
TTW Inc. - WinMan software

Do you remember your favorite cheat sheet from language class? It was a book or a pamphlet or even a tightly scrawled crib sheet with key reminders on how to navigate the gap between your birth tongue and a whole new world. You carried it around with you to help find your way.
Jean and Ori have put together the best cheat sheet for people straddling the language gap between modern manufacturing and old school accounting. I can't recommend "Real Numbers" enough. Mine is already dog-eared. I carry it with me to international planning meetings to help me translate the smoke and mirrors that can fill the room.
"Real Numbers" is filled with concise, easy-to-understand chapters that assist any decision-maker in understanding the transition from bean counter to business partner. Every chapter has a value-adding how-to approach to overcome the major mental hurdles blocking lean enterprise: controlling wasteful transactions instead of eliminating them, supporting rear-view driving instead of agile leadership, covering every contingent instead of reporting accurately what is needed and when.
Most companies attempting lean transition run into the failure of business accounting to update its methods in stride with lean thinking. This book explains how accountants can see themselves in a new role bridging that gap. And seeing that new role with a shared accounting language is half the battle - won.

The book "Lean Thinking" by James Womack and Daniel Jones came out 10 years ago. I must confess I was rather underwhelmed by it at the time, but now lean is impossible to ignore - organisations of all sizes, in all sectors - from local authorities, to transport, to manufacturing - are adopting lean management. Lean is now on the agenda of organisations everywhere, and that means that accountants are increasingly being required to know lean techniques.

I strongly believe that "lean accounting" is a set of skills that will be much in demand in future, and I believe, equally strongly, that management accountants are well placed to take advantage of this opportunity. "Real Numbers: Management Accounting in a Lean Organization" was one of the first books on lean accounting published and is full of the pioneering spirit, exploring a topic not fully defined (at that time). The book offers some early insights into management accounting in lean organisations, and the skill sets we need to adopt to be a key part of the lean revolution, but it lacks detail on some areas as well as a clear strcture.

The book opens with a fine description of the challenge - "Accounting departments produce information that runs late and is often misleading. Few managers fully understand the columns of numbers and variances presented in their reports". The book then spends 25 pages arguing the case for change, and, throughout, regales the reader with the drawbacks of absorption costing, but never quite leads to a promised new land.

And that is the main problem with this book. Opening up a new subject area, it often lacks clear direction, or even structure. For example, the chapter on performance measures provides some interesting ideas, particularly on making ROI relevant to employees at all levels, and on using "total lead time" in indicators rather than just process time; but it fails to show how it all ties together. There are no worked examples, or "Balanced Scorecard" type structures to integrate different measures. Indeed, the book lacks worked examples throughout and this is another major weakness.

After the chapter on performance measures, we have a long and apparently structureless section about streamlining the finance function. This is more a random collection of thoughts, including how the desks should be rearranged, than any structured approach to restructuring the accounts department.

But there are several interesting sections in the book. The chapter on remodelling the profit and loss account is useful, and it contains a valuable warning that in the early years of lean, financial statements can show a reduction in profitability as stocks are liquidated; though this can be countered with the clear cashflow benefits. There is also some intriguing discussion of introducing Kaizen (breakthrough improvement) teams into the accounts department - sounds fun !. And the chapter on introducing the lean philosophy to capital budgeting (using lifecycle costs, including the impact on working capital) is excellent - though, again, is let down by a lack of worked examples.

The book closes with an illustration of how the cashflow benefits of lean finance future growth, with some outstanding examples from US enterprises. The final line of the book exhorts accountants to "rediscover your relevance". "Real Numbers" is an early attempt to help accountants rediscover their relevance. More recent books on the subject provide a more structured view of this important topic which is now coming to full maturity.

Most lean accouting books - in fact most books - present what they consider the solutions, the final answer. Real Numbers does present some answers, but more importantly, they provide the direction. By painting a picture of the ideal state that we should all be shooting for, they give us the guideposts to help us make progress and improvements day after day after day. This is much more powerful, because the progress that follows reading and applying this book can last for years. It is also more flexible because we can adopt what they are teaching to a wide variety of settings and companies. Furthermore, the authors have done it - they were there making it work. I think 10 years from now we will still be referring to this book as an important contribution to lean accounting and to accounting in general.

It touched on what we learned in Lean Accounting Training and will be an excellent resource to back up that training as we apply the principles in our own Lean journey. It gives real world examples of Lean Accounting applied in two companies that have truly embraced the Lean Enterprise: Lantech and Wiremold are both featured.

Todd Kunze
Division Lean Manager for O-Ring
Parker Hannifin Corporation

Real Numbers touched on everything that we are learning in lean accounting training. An excellent resource to
back up the training as it gives real world examples of lean accounting applied in two companies that have truly embraced lean: Lantech and Wiremold are both featured.

Todd Kunze
Division Lean Manager for O-Ring
Parker Hannifin Corporation

This is a great book on creating a lean organization and its impact on the accounting function. The first part of the book concentrates on "What is lean?" and "How does it change things?" The second part of the book looks at how the accounting function changes from one of bean counter to one of high value business partner.

An important concept is the idea of accuracy vs. precision. While much information is both, accountants tend to spend a great deal of time making information precise, while being accurate is good enough. As a past accountant for over 20 years, I myself have fallen into the precise trap. This book helped me understand why accuracy is to be preferred over precision: Precision can eat up valuable resources with little to show for it.

Karen L. Jett, CMA - Author, Grow Your People, Grow Your Business

This book is written in a simple manner for managers and operation people, as well as for controling and financial people. Failure of implementing JIT/Lean or QRM is often due to false understaning of the operations part itself and resistance of employees for change, but on the other side as well keeping old cost accounting practices and therefore numbers/reports not showing the improvements made. To judge improvements, you first need to know about what different cost exist and their real leverage. E.g. many companies still believe, inventory cost is a single digit percentage of a part cost p.a. ..

Traditional cost management has some basic flaws, mainly considering that modern companies have a different structure compared to the ones, when most cost accounting methods where developped in the past. Without changes in cost accounting thinking related to what is going on in your company, even succesful operational changes will never become visible. In the worst case the numbers shown by your actual system will even show worse performance and JIT/Lean or QRM will be quickly dropped! Unfortunately even intelligent people have some trouble to really interpret reports and we often do not dare to ask simple questions as e.g. can I really see something out of this numbers? I'm not stupid, but often I must confess not to see something of real value out of some crunched number. We should more often start to ask ourself, what the hell we are doing with numbers? Without this critics, we are flying blind most of our time - and succes should not only be a question of luck..

Accuracy or precision is not the same and the book provides you good information, where the pitfals may be. Lean means as well, that more closures and more frequent simple cost information is better for operation purpose, than looking monthly back.

Any good and "heavy" book about JIT/Lean or QRM should provide some information about adaptation of your cost accounting system. Once again, as a very positive example to be mentionned here, the book Quick-Response-Manufacturing does so by explaining one aspect - more detailled information will be provided by this book here.

I loved the expression of the authors about "change the reports, not the people.. ". There lies a lot of wisdom in this word.

Best Regards,

Oliver

How can a manager gain a real picture of a company's performance? Real Numbers: Management Accounting In A Lean Organization helps managers understand management accounting practices, which often produce complex financial statements which have little to do with reality. Each of the authors is a CFO who probes management accounting systems and how simplicity and clarify can be restored to an organization's accounting system. The authors provide some solid, invaluable advice on tweaking accounting practices to get the most from facts and figures generated by accountants.

It is about time that someone wrote a book this stellar conveying the power of lean in financial accounting. Every company that is looking to become lean should read this book