Lean CFO Blog

The Matching Principle and the Value Stream Income Statement

Posted on July 13th, 2017 by Nick Katko | No Comments

I spoke last month at a CFO Conference about Lean Accounting. After explaining the use of actual costs on a value stream income statement, we had a good discussion about whether a value stream income statement complies with the matching principle of financial accounting. This question has actually come up quite regularly over the years

Lean Decision Making: Production Cost Analysis

Posted on July 06th, 2017 by Nick Katko | No Comments

The purpose of a value stream income statement is to analyze current value stream costs compared to current value stream performance measures to determine root cause analysis of current costs. Actual production costs for any value stream include the labor costs for people that work in the value stream, costs to own, lease, operate and

Lean Decision Making: Material Cost Analysis

Posted on March 24th, 2017 by Nick Katko | No Comments

In the world of Lean Accounting, you will hear that a value stream income statement needs to show “actual material cost”, and is typically defined as actual material purchased. This confuses accounting professionals because it appears to be in conflict with the matching principle of accounting. So here is my attempt to clear up this

Lean Decision Making Framework: General Guidelines

Posted on March 16th, 2017 by Nick Katko | No Comments

In this blog, I’d like to explain 3 general guidelines accounting should follow for creating an effective lean decision framework for your lean manufacturing company. #1- Financial Impact on Value Stream Profitability The general rule for lean decision making is to understand the financial impact of any decision is based on the impact on total

Creating a Value Stream Income Statement

Posted on February 21st, 2017 by Nick Katko | No Comments

Creating value stream income statements is the second part of a lean decision making framework that is not based on a standard costing system. The value stream income statement is an essential element of lean decision making due to how lean practices & methods impact profitability. It’s important for accountants to understand the “lean logic”

Removing Standard Costing from Decision Making – Part 1

Posted on February 08th, 2017 by Nick Katko | No Comments

Using standard product costs in business decision-making works well in traditional manufacturing companies, because standard costing systems were designed for traditional manufacturing. In lean manufacturing companies, continuing to use standard costing for business decision-making will create conflict and confusion throughout the organization. One of two outcomes can occur when standard costs are used in business

Lean Accounting & Inventory Reduction

Posted on February 02nd, 2017 by Nick Katko | No Comments

One of the most critical responsibilities accounting must assume, in a lean manufacturing company using a standard costing system, is to explain the financial impact of reducing inventory. Most manufacturing companies begin their lean journey with high levels of inventory. Through the deployment of lean practices and methods, inventory will be reduced. One of the

Lean Accounting & Standard Costing Variances

Posted on January 26th, 2017 by Nick Katko | No Comments

A standard costing system generates rate & volume variances by design. Standards are entered into the system, actual is reported into the system and variances are created. Because standards are used to value inventory and cost of goods sold, actual variances are reported on the income statement to bring the financial statements back to actual.

Lean Accounting & Standard Costing: An Introduction

Posted on January 19th, 2017 by Nick Katko | No Comments

If you are in the accounting department in a lean manufacturing company, and your company uses a standard costing system, it is inevitable that the accounting department will be faced with confronting how its standard costing system is being used. I stress the term inevitable, because based on my own experience both as a CFO

Lean Accounting and GAAP/IFRS

Posted on December 20th, 2016 by Nick Katko | No Comments

Some people in the accounting profession make an argument that Lean Accounting is not compliant with GAAP/IFRS (for the rest of this article I will simply use GAAP instead of GAAP/IFRS). This argument usually occurs in manufacturing companies and centers around the Lean Accounting practices of simplified inventory valuation and using a value stream income

Recent Posts
Recent Comments
Archives
Contact Nick
- nkatko@strategicfinancialsolutions.net
- Name*
- Email*
- Phone
- Inquiry*
- Message*
Nick’s Lean Accounting Journey

Nick Katko is one of the early pioneers of Lean Accounting. As a CFO in the 1990’s Nick implemented a complete Lean Accounting System in conjunction with his company’s lean transformation.
Read more

Nick has leveraged this experience along with his strong accounting background to assist companies resolve the real-world issues they face when implementing lean accounting. He facilitated Lean Accounting implementations with a wide range of companies, from multi-national companies such as Boeing, Parker-Hannifin, Novartis and Nestle to privately held family businesses. Nick’s industry experience includes applying lean accounting in manufacturing, engineering, food processing, process manufacturing, publishing, education and health care.

Nick is co-author of The Lean Business Management System; Lean Accounting Principles & Practices Toolkit (2007). Nick’s latest book, The Lean CFO: Architect of the Lean Management System was published in September 2013.

Nick is a Certified Public Accountant and a member American Institute of Certified Public Accountants and holds a BS in Accounting and an MBA in Finance, both from the University of Kentucky.

Useful Links