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" appears to offer an insight into management accounting in lean organisations, and the skill sets we need to adopt to be a key part of the lean revolution. 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. A five page summary I could accept, but this seems excessive - surely my buying this book presupposes that I accept the arguments ?. I am looking to be enticed into the exciting new arena that lean accounting offers; I am looking to be inspired; and to be given tools to empower me in this field. Unfortunately, "Real Numbers" keeps regaling me with the problems of cost accounting. We are constantly reminded of the drawbacks of absorption costing, but never quite led into the promised new land.

And that is the main problem with this book. It seems to lack a clear direction, or even structure. Instead it meanders between apparently random thoughts, without much raising my level of excitement or interest. 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 interesting sections in the book. The chapter on remodelling the profit and loss account is useful (though, I suspect, pretty familiar territory to management accountants), 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". It is a shame the authors didn't use this mantra more in its writing. The overall pace is ponderous, the style meandering, and the lack of worked examples is a real omission.

The last book I read on lean accounting - "Who's Counting? A Lean Accounting Business Novel" (available on Amazon.com) was a hammy introduction to the concepts of lean accounting, but at least it was readable and had a clear direction. I much prefer it to this uneven and poorly structured mixture. I don't see how you could introduction lean management to the finance department using this book. While there are some interesting sections, overall it is a disappointment, I am sad to say.

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.

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