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

Date01 May 2016
Published date01 May 2016
© 2016 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22163
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
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
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
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
Is it time for the SOFP
and GAAP reports to coexist
peacefully to serve your firm
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
You can:
•Improve inter-team communication
and understanding with the
•Face issues head on that are
often hidden from view otherwise
•Minimize surprises and crisis
management as the end of quarter
•In more fungible terms: Reduce
inventory, improve on-time
delivery, improve cash flow
Source: BMA SOFP Blog #8, http://blog.maskell
And, let’s not forget—you
also have a bridge to more
informed income statement

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