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Insights and Advice from a Lean Accounting Leader

by Mike De Luca
April 22, 2021

Insights and Advice from a Lean Accounting Leader

by Mike De Luca
April 22, 2021 | Comments (3)

Lori Malina, controller of Kaspar Companies in Shiner, Texas, provided the "Company Spotlight" for the inaugural Lean Accounting Learning and Practice newsletter in October 2019. In it, she highlighted the finance team’s work to improve the monthly financial close process, which dramatically reduced the number of days to close from 25 to three, ensured that management received financial performance reports in a timely fashion, and created capacity on the team’s part to take on additional improvements. Mike De Luca recently had the chance to catch up with Lori to learn more about how they started and what they’ve accomplished so far with Lean Accounting at Kaspar Companies.

Mike: How did you get started with Lean Accounting, and, maybe more importantlywhy did you get started?

Lori: Kaspar began with lean in manufacturing in 2017. We were making improvements through operational kaizens, and I participated in many of those kaizens. This gave me the opportunity to ask questions, learn about the production process, and learn about lean overall. We didn’t start in accounting until a year or so later. 

Prior to our getting started, there had been a good deal of confusion interpreting the financial statements. We had standard costing and needed to change the way that we accounted for costs so that we could reflect the lean improvements on the factory floor. Transforming the financial statements was the most important place to start because they weren’t well understood. We needed to fix the disconnect between the improvements happening in operations and the numbers on the financial statements.

Our CEO was leading the lean effort; he found the book Real Numbers (by Jean Cunningham and Orry Fiume)which he recommended to me. That book became our guide; I flagged all the things in the book that I wanted to test at Kaspar, and we ran experiments to see how the concepts in the book related to our own processes. We asked ourselves: “how can we migrate current accounting processes to be more like the lean accounting processes in the book and, most importantly, change the way we produce financial statements so the end-user can understand them?” Then we created an action plan to create and roll out improved processes, develop standard work, and integrate lean thinking into daily management.

Persistence is the key; if something isn’t working, you can’t just give up on it. What did you learn, and what will you try next?

Would you say more about your lean daily management practices and how they support the overall lean transformation?

We started with a daily huddle at the beginning of the shift, incorporating a huddle board with metrics. We implemented lean daily management visual boards in every area of the finance department: payroll, payables, receivables, etc. Over time, we moved to huddles twice a day. The morning huddle expanded to include a lean learning topic lead by a different person each time, so it lasts between five and 20 minutes. The afternoon huddle is five to 10 minutes. Every huddle starts with a safety topic, and then the team checks on the visuals – is everything up to date, and are there any obstacles we need to address? At first, the huddles were a little clunky, but we kept practicing and reminding ourselves that we needed to stick with the new practices to get value from them. Persistence is the key; if something isn’t working, you can’t just give up on it. What did you learn, and what will you try next?

We use our huddles to talk about problems, obstacles, and improvement experiments, and we track the improvements on our visual boards – from “idea” to “in-progress” to “complete.” This way, we’re improving every single day, not waiting for the next kaizen.  

We track improvements by individual employee, so we can encourage everyone to bring forward and work on their improvement ideas and celebrate them -- and to be clear that improvement is everyone’s work. Everyone is continuously looking for obstacles and ways to improve. We couldn’t do what we’re doing today without continuously eliminating waste. We’ve freed up capacity on the team to the point that some employees have been cross-trained to help facilitate improvements on the factory floor and in other areas of the businesses. 

What were the main resources you used to learn and get started? 

Our main resources have been three lean accounting books: Real NumbersThe Value Add Accountant (by Jean Cunningham), and Lean Accounting: Best Practices for Sustainable Integration (various authors, edited by Joe Stenzel). Using those, our approach has been learning through doing: kaizen events, improvement experiments, and daily management. 

What are some of the other ways you’ve integrated lean thinking into accounting and finance? What have the most significant benefits been for the team and the company?  

We practice PDCA (plan, do, check, adjust) continuously and encourage each other to run the experiment even if it means failing. 

We’ve included our customers in informing any process changes we’ve made. It’s very important to get the voice of the customer in finance and accounting improvements. For example, we used voice of the customer input to inform a reduction of general ledger accounts by over 50%. Voice of the customer input also informed the transformation of the financial statements and elimination of reports that weren’t being used. 

We’ve also learned to automate as much as we can, from month-end reporting, daily reporting, and journal entries to using uploads instead of manual keying. No “waste rock” is left unturned. We’re constantly questioning processes and products: are they still needed, and are they still of value? 

Lean has allowed us to grow team members professionally as well. Every employee in finance has their own storyboard where they track what they’re working on and what’s on deck. The storyboard helps us track capacity as well, so we can see who has capacity today and how we can use that capacity to improve the business.

We had to reinforce that it’s okay to fail when you try an improvement. The key thing in trying experiments is asking what we learned from it and what will we do next? And to stick with it, not just give up after the first experiment.

What are some of the challenges you’ve encountered in bringing lean thinking into accounting, and what helped you work through those?  

One of the biggest challenges is changing the way people think. Everyone has their mental models. People may not see why a process needs to be improved, especially if it’s been in place for a long time. People may also be afraid of trying something new and failing. We had to reinforce that it’s okay to fail when you try an improvement. The key thing in trying experiments is asking what we learned from it and what will we do next? And to stick with it, not just give up after the first experiment. Through consistent messaging, we’ve discovered that some of the employees who were most reluctant to adopt lean thinking have become its biggest advocates. 

What’s the next thing you want to focus on and why? 

We had several kaizens last year, and something came up in the last one that was out of scope – the cash management process – so we put it in the parking lot, but we’ve cued it up as the next improvement project. Kaspar is structured as separate legal companies with one parent company, and cash management has created excess work and extra processing waste – work that’s not value-added – so we’ll be addressing that.  

What advice do you have for other organizations who either want to get started or deepen their application of lean in accounting?

Don’t wait, start now – you just have to get started, that’s the hard part. Create some momentum. When we got the financial close down from 25 days to three, that gave the team the momentum they needed to keep going. Read a lean accounting book, talk to others who have implemented it, try an experiment, just get started, and learn through doing. 

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3 Comments | Post a Comment
Jean Cunningham April 22, 2021
2 People AGREE with this comment

Lori and Mike, how rewarding to here that the books were helpful in allowing you to create your own ways. I'm proud of Kasper, your team, and you.  

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Lori Malina April 23, 2021

Thanks Jean for all the good advice!  We still have a long way to go as lean is a journey!

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Orry Fiume May 01, 2021
1 Person AGREES with this reply

Lori, I concur with Jean…and rewarding is the right word.  When we hear stories like yours of how our work has helped both accountants and non-accountants think differently about how accounting can add value to the company’s efforts, it lets us know that all of the writing and teaching has been worth the effort.  Thank you. 

And thank you Mike for searching out and bringing these stories to light.  Keep up the good work.

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