Peaceful Coexistence: A Proven Lean Report May Lead to Better Earning Estimates … and More!

• DOI: http://doi.org/10.1002/jcaf.22163
• Date: 01 May 2016
• Published date: 01 May 2016

69

© 2016 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22163

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Peaceful Coexistence: A Proven Lean

Report May Lead to Better Earning

Estimates … and More!

Bill Magrogan

As you review the debates

about Lean versus tra-

ditional product cost

accounting, it is often a matter

of apples versus oranges—yet

both can be fruitful alongside

one another.

Lean managers com-

plain that generally accepted

accounting principles (GAAP)

reporting does not suit them. In

the near term, that is an under-

standable perspective. GAAP

reports are neither detailed nor

timely enough to support ongo-

ing operations effectively nor

efficiently.

Lean managers prefer to

use the Sales, Operations and

Finance Planning (SOFP)

Report format to assess and

manage ongoing operations for

efficient use of capacity and

capabilities. Some nominal—

but not inclusive—SOFP ele-

ments are shown in column 1

of Exhibit 1 below.

Of course, the SOFP

Report is not GAAP—nor

is GAAP immediately useful

to Lean managers. Yet they

can coexist to the benefit of

both financial accountants

and Lean managers, as well

as keep the C-suite more fully

informed.

Closer to real time than

traditional GAAP reporting,

SOFP Report actuals and

trends may help a financial

accountant estimate next

quarter’s income statement

more effectively—perhaps in

time to do something sensible

about it long before closeout

occurs.

Financial accountants can

adjust lead indicators from

SOFP Reports to create effec-

tive income projections and

insights, as suggested in the

table below.

Aware of SOFP trends,

astute C-suite execs may help

impact income statement

trends more effectively long

before the close-out process

begins!

Is it time for the SOFP

and GAAP reports to coexist

peacefully to serve your firm

best?

Full SOFP Report Benefits

Identified in His Blog by

Brian Maskell, IMA Member,

President of BMA, Inc.

Ideally, you are revisiting the

unfolding of your business plan

in the SOFP Report Review every

month.

You can:

•Improve inter-team communication

and understanding with the

C-suite

•Face issues head on that are

often hidden from view otherwise

•Minimize surprises and crisis

management as the end of quarter

approaches

•In more fungible terms: Reduce

inventory, improve on-time

delivery, improve cash flow

Source: BMA SOFP Blog #8, http://blog.maskell

.com/?p=180

And, let’s not forget—you

also have a bridge to more

informed income statement

projections.