There was recently an interesting article in the Strategic Finance journal¹ about the need for accountants to take on a more strategic role in their companies². The piece – “Bean Counters No More” – was written by Neil H. Baier who told his own story about how he achieved this transition, and championed:
– Stop being overhead. Start being valued business partners.
– Stop counting beans. Start helping to grow the beans.
Calling this “An Accountant’s Call To Arms”, Mr. Baier laid out the 10 Commandments for accountants needing to insinuate their way into a more strategic role of partner, problem solver, and decision-maker. Among the 10 Commandments are:
1. “Stand Up for Yourself”
2. “Don’t Take No for An Answer”
6. ” Get Your Ducks in a Row”
8. “Don’t Let People Project Their Fears Onto You”
This was a laudable and inspiring article that fits well into the strategic focus of the Institute of Management Accountants (IMA). The flaw in the argument however is the old story. How much time do you have in a day? This post shows a case study of a company that has removed substantial work from their Financial Controller and enhanced him to a more strategic role.
Most of our customers have finance and accounting teams that are heavily stretched with all the vital information and reports needed by their internal and external “customers”. For accountants to take on a more strategic role we MUST REMOVE work from their schedules.
Accountants have to grapple with complicated IT systems that don’t always have the right data at the right time. They have thousands or millions of transactions that make up the numbers they need, and many of these numbers are of questionable accuracy³. They have built spreadsheets to gather and report the information, but it is often difficult to reconcile than back to the GL. On top of this, they are under strict reporting deadlines. Unless they are Wonder Woman or Superman these people are very over-stretched and invariably working long, long hours; especially at month-end. For accountants to become strategic partners we must ELIMINATE (not automate) much of this time-consuming and wasteful activity.
I think these issues are getting worse for accountants, and for other support people in companies large and small. Many companies reduced support head-count during the recent recession and have not replaced them since. In addition, many companies are adding more and more reporting in a desperate effort to gain operational and financial improvements. A company I am currently working with showed me 97 reports that are printed regularly throughout the month. When I suggested that this was too many they laughingly told me about an additional 200 reports they had not shown me. For accountants to actively move the company’s strategy forwards we must be LEAN.
Parker Hannifin, Racor Division, Beaufort, SC
Troy Hammond is the controller at the Racor division plant of Parker Hannifin in Beaufort, SC. Troy has freed up a good deal of his time by using Lean Accounting. This additional time now allows him to take a strategic leadership role, instead of the proverbial “bean counter.
Here’s what they did:
- Organized the plant around value streams, and eliminated the wasteful detailed tracking of labor, work orders, etc.
- The traditional financial reports were replaced by “plain English” value stream income statements. These are easily understood by everybody and provide real and useful numbers.
- By the use of simple, largely manual cell boards throughout the plant the processes are under excellent control. No nonsense about variances or labor efficiency. The processes are monitored by the people in the cells and they drive continuous improvement.
- Value stream measurement boards show the overall performance of the value streams and drive continuous improvement at the value stream level through the use of kaizen-style events.
- There is an emphasis on everybody at every level developing business acumen. The entire organization uses the Lean Accounting statements to become “business partners” driving customer value and lean change.
- Decision-making has been improved and simplified using the “Box Scores”. These are easy to use and gives real information. None of the spurious, misleading information like sales margins or overhead absorption.
- Thousands of wasteful transactions have been eliminated. The shop-floor is run visually. There are no wasteful meetings to discuss variances, absorption, reconciliations, and adjustment.
- The month-end reporting is done using the lean accounting statements. The controller makes a few adjustments around inventory levels, corporate allocations, exchange rate gains/losses etc. .
Troy Hammond and his boss – Mark Kovtan – have achieved (with a little help from his friends) what lean companies do. He has eliminated a great deal of waste, created more time and capacity, and uses that extra time to do more strategic work that drives the company forward. He has worked on some important strategic sourcing and has become a recognized lean leader in the company. These radical improvement came by the careful introduction of Lean Accounting.
This story is classic lean economics. Focus on customer value. Eliminate waste. Free-up capacity throughout the company. Use the newly available capacity to improve the business and grow the business.
The accountants at Racor division are fulfilling Mr. Baier’s desires for strategic impact on the company. The people have the time and focus to achieve this by the radical, though prudent, simplification created by Lean Accounting in the division.
¹. The monthly journal of the Institute of Management Accountants.
². “Bean Counters No More” by Neil H. Baier. Strategic Management, May 2014.
³. Have you ever wondered why auditors so often insist on companies cycle counting their inventory, for example? It is of course because the numbers are invariably inaccurate. The auditors concern, though, is the bottom-line inventory valuation. They recognize that some items will be over and others under, and that much of the inaccuracy is offset by this. But for your company, too much of one item and two little of another does NOT offset the problem. It leads to shortages causing late deliveries, and overstocks causing financial write-downs. Inaccuracy is endemic to ERP/MRPII systems.