Ade Asefeso MCIPS MBA Published His New Book Lean Accounting

LONDON - July 10, 2013 - PRLog -- Lean Accounting. Why Lean Accounting?

That’s the question that Ade Asefeso answers in his new book “Lean Accounting”

Ade said “Lean accounting metrics is all about breaking away from traditional cost accounting cost objects like product or job and is driven by a new cost object 'Value Stream'”.

Ade continued by saying; “Lean accounting helps organisations going through lean transformation to develop their management accounting systems to support the lean philosophy. Traditional accounting systems (particularly standard costing) result in decisions which are anti-lean”.

Visit http://www.booksonline.aaglobalsourcing.com/lean-accounting for details.

Ade gave the illustrative example below by saying:

“I will use this short example to illustrate why traditional accounting approaches can lead us to the wrong decisions. Let's assume a company runs a traditional standard costing system with a Standard Cost of £27 per piece made up of materials £12, labour £5 and overhead (absorbed on a labour hours basis) of £15. A request for quote comes in from a major potential customer for 10,000 pieces. The customer's target price is £29 per piece. Should we take the order? In its standard costing system the company adds 15% to its standard cost when making quotes, thus it would quote this customer £31.05 per piece and not take the order.

Is this the right decision? The answer is we don't know. The Standard Cost approach doesn't tell us whether we have the spare capacity to produce the order; it doesn't tell us whether we have the potential to improve our Value Stream to produce the order and so on. In fact the Standard Cost tells us nothing.

What we actually need to do is take an incremental (marginal) costing approach to the decision. The materials to produce the extra product will cost £50,000 (at £5 each). If we have enough spare capacity in the Value Stream then there will be no extra labour cost, but let's assume we need to work £100,000 of overtime to complete the order. There won't be any extra overheads, but let's say there would be £25,000 of extra energy costs and consumables. Thus the incremental income from the order would be £290,000; and the incremental costs would be £175,000 (£50,000 + £100,000 + £25,000) = an extra £115,000 contribution to profit.

Thus, based on Standard costing we would refuse a profitable order. Of course there are other factors to take into account; what impact would this price of £29 have on our other customers? Is this a one-off order or a potential long term relationship? etc. I am not saying that this approach gives us the whole picture, but it gives us more of the picture than a standard costing approach”.

Ade concluded by saying “The purpose of lean accounting is to tell us about the flow through the Value Stream; to tell us about the capacity for extra work in the Value Stream; and to tell us about the incremental costs of alternative decisions and actions. Traditional accounting tells us nothing about these things”.

Visit http://www.accountantinswindon.com/why-lean-accountant for details

Ade spent a lot of his time representing various companies either at supply chain level, operational level, sales and marketing level, and senior executive level across Asia, North America, Africa, Eastern and Western Europe.

Ade is currently the CEO of AA Global Sourcing Ltd. A company that helps local businesses outsource so that they can enjoy the benefits that used to be enjoyed by big corporations for years.

All this still doesn’t make mention of Ade’s increasingly successful career as an author, of numerous books on Finance, Business Ideas, Personal Development, Self help, Outsourcing, Lean manufacturing, Lean Office, Lean Sales and Marketing, Lean Healthcare, Lean Accounting, Real estate, Balance Scorecard and Online Marketing.

Visit http://www.accountantinswindon.com for details.