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Internal Reporting and Improvement Initiatives (Portfolio 5313)

BNA Tax and Accounting Portfolio 5313, Internal Reporting and Improvement Initiatives (Accounting Policy and Practice Series), discusses popular corporate improvement initiatives and the role of internal accounting functions in implementing and maintaining these initiatives.

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BNA Tax and Accounting Portfolio 5313, Internal Reporting and Improvement Initiatives (Accounting Policy and Practice Series), discusses popular corporate improvement initiatives and the role of internal accounting functions in implementing and maintaining these initiatives. It, in essence, explains how accounting departments can function in a business environment that is demanding more real-time information and less historical accounting information.
The Portfolio begins by explaining the traditional role of internal accounting departments and how much of the information these departments provide does not contribute to the efficient operations of most businesses. Essentially, many accounting departments use traditional cost allocation methods required by generally accepted accounting principles, but these methods typically do not produce information that is helpful in making business decisions. Moreover, much of the information accounting departments provide concerning productivity, such as certain variance reports based on historical information, typically do not provide the feedback necessary to help managers and employees assess their performance in a meaningful manner.
The Portfolio sets forth a practical vision for how accounting departments can transform themselves into corporate team members who contribute real-time information to managers and workers to help those individuals assess their performance and timely identify and correct production problems. It discusses the cultural changes that must occur and the expanded roles accountants must take to effectuate this transformation.
This Portfolio explains many of the popular improvement initiatives that many organizations have adopted, in one form or another. These initiatives are six sigma, just in time, lean, Demand Flow®, and Theory of Constraints. These initiatives are designed to improve internal processes and production quality. One common theme in these initiatives is the concept of a “pull” system, in which work is produced in response to customer demand, as opposed to a “push” system, in which work is produced in anticipation of customer demand. The Portfolio explains the basic concepts and benefits of each of these initiatives and the evolution of the initiatives. It also provides guidance on how to develop and implement an effective outsourcing strategy.
After explaining several improvement initiatives, this Portfolio explains the metrics that accounting departments should develop to support these initiatives. It also explains how an organization's books and records may change once it fully implements an improvement initiative.
This Portfolio may be cited as BNA Tax and Accounting Portfolio 5313, Budd and Budd, Internal Reporting and Improvement Initiatives (Accounting Policy and Practice Series).


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AUTHORS

CHARLENE S. BUDD, PH.D., CPA
Charlene S. Budd, Ph.D., The University of Texas at Austin; MBA, Baylor University; BBA (summa cum laude), Baylor University; AA (Applied Arts), McLennan Community College. As the owner of Budd Management Systems, Dr. Budd is a frequent consultant in practice improvement initiatives. She is a Professor Emeritus at Baylor University, where she taught courses in management accounting and project management. Dr. Budd is the chair of the Business Environment and Concepts Subcommittee of the American Institute of Certified Public Accountants and Chair of the Finance & Metrics Committee of the Theory of Constraints International Certification Organization (TOC-ICO). She is certified in all areas of Theory of Constraints by the TOC-ICO and as a Project Management Professional by the Project Management Institute. Dr. Budd completed extensive training with the Avraham Y. Goldratt Institute in Theory of Constraints concepts, including Critical Chain Project Management and Management Skills, and is a former member of the Institute's JEMBA group. She is a member of numerous organizations including the Financial Executives Institute, Institute of Management Accountants, and Project Management Institute. Dr. Budd has authored and co-authored numerous books and articles on accounting.

CHARLES I. BUDD
Charles I. Budd, Masters of Divinity (summa cum laude), Baylor University; B.A. (Psychology), Baldwin-Wallace College. Mr. Budd is a former Chief Executive Officer of technology companies including Financial Information Trust, InterContinental Computer Systems, Inc., and Technology Connections, Inc. Mr. Budd is currently a principal in the consulting firm, Budd Management Systems. As a consultant on project management and information systems projects, he has led seminars, conducted workshops and presentations around the world, and co-authored two books. Mr. Budd is a certified Project Management Professional (PMP), a certified Systems Analyst, and holds a Jonah certification in the Theory of Constraints. He is currently active in the Project Management Institute as well as several information systems and civic volunteer organizations.

TABLE OF CONTENTS

Detailed Analysis

I. Purpose and Scope of Portfolio

II. The Accountant's Role as it Exists Today

Introductory Material

A. Accounting Systems Under Fire

B. Accountants as Strategic Implementers

1. Internal Balkanization: A Problem for Strategic Planning

2. Strategic Disconnects

a. Wrong Funding: Disconnects Between Strategic Objectives and Project Objectives

b. No Completion: Disconnects Due to Project Failures

3. Lack of Project Management Skills

4. Multitasking: The Real Culprit

C. Accountants as Controllers and Report Preparers

1. Reports Primarily for Outsiders

2. Risk Evaluators

3. Reports for Insiders

a. Reports Generally Provided

b. Reports Generally Not Provided

D. Summary

III. The Future Role of Management Accounting

Introductory Material

A. The Role of Automation

B. Users' Demands

C. A New Role on the Executive Team

1. Understanding the Organization

2. Facilitating Organizational Change

3. A Fully Participating Member of the Executive Team

D. Metrics and Reports That Support Strategic Initiatives

E. Accounting's Expanding Internal Consulting Role

F. Focus Attention on the Entire Supply Chain

G. Addressing Organizational Innovation and Change

1. Resistance to Change

2. Innovation Adoption and Propagation

H. Summary

IV. New Operating Environments

Introductory Material

A. Six Sigma and Other Quality Programs

B. Just In Time (JIT)

C. Lean

D. Demand Flow

E. The Theory of Constraints

F. Outsourcing

G. Summary

V. Six Sigma and Other Quality Programs

Introductory Material

A. Basic Concepts of Quality Programs

1. Variation

2. Six Sigma and Deming Quality Concepts

a. Statistical Analysis

b. Improving Quality

3. Design for Six Sigma

B. Value of Quality Programs for Organizations

C. Information Needs of Quality Programs

D. Supportive Accounting Information for Quality Programs

E. Strengths and Weaknesses of Quality Programs

F. Summary

VI. Just In Time (JIT)

Introductory Material

A. Basic Concepts of JIT

1. People

2. Process

a. Quality

b. Excellent Vendor Performance

c. Reducing Order Quantities

d. Software System Support

e. Appropriate Measurements

3. Plant

a. Schedule Control

b. Reducing Setup Times

c. Cellular Manufacturing

B. Value of JIT for Organizations

C. Information Needs of JIT

D. Supportive Accounting Information for JIT

E. Strengths and Weaknesses of JIT

F. Summary

VII. Lean Operations

Introductory Material

A. Basic Concepts of Lean

1. Lean Manufacturing

a. Primary Elements of Lean Manufacturing

(1) Manufacturing Flow

(2) Organization

(3) Process Control

(4) Metrics

(5) Logistics

b. Lean "Truths" in the Manufacturing Industry

2. Lean Operations

3. Implementing Lean

a. Baseline (Value Stream Mapping)

b. Desired Future State

B. Value of Lean for Organizations

C. Information Needs of Lean

D. Supportive Accounting Information for Lean

E. Strengths and Weaknesses of Lean

F. Summary

VIII. Demand Flow

Introductory Material

A. Traditional Flow Lines

B. Basic Concepts of Demand Flow® Technology (DFT)

1. Analysis of Process Flows

2. Identification and Division of Work

3. Staffing

4. Total Product Cycle Time

5. Customer Responsiveness

6. Care and Feeding of a DFT Production Line

a. Kanban Replenishment

b. Operations Sheets

c. Backflush Accounting

C. Value of Demand Flow® for Organizations

D. Information Needs of Demand Flow® Programs

E. Supportive Accounting Information for Demand Flow®

F. Strengths and Weaknesses of Demand Flow®

G. Summary

IX. Theory of Constraints

Introductory Material

A. Basic Concepts of Theory of Constraints

1. New Product Development

2. Production: Drum, Buffer, Rope (DBR) Scheduling and Control

a. System Boundary

b. Organizational Goals/Objectives

c. Developing the DBR Solution

d. DBR Operation

e. Operating Control: Buffer Management

f. Improvement Decisions

3. Distribution and Supply Chain Management

4. The Thought Process

B. Value of the Theory of Constraints for Organizations

C. Information Needs of Theory of Constraints

D. Supportive Accounting Information for TOC

E. Strengths and Weaknesses of the Theory of Constraints

F. Summary

X. Outsourcing: The Outs and Ins

Introductory Material

A. Basic Concepts of Outsourcing

1. Outsourcing Is NOT a Momentary Fad

2. You Cannot Outsource Your Management Problems

3. Critical Success Factors for Outsourcing

a. Identify Processes to Be Outsourced

b. Effectively Manage Outsourcing Project

c. Create Detailed Project Plan

d. Mitigate Risks

e. Appoint Sponsor

f. Create a Lasting Contractual Relationship

4. Long-Term Win-Win Arrangements

B. Value to Organizations of Outsourcing

C. Information Needs of Outsourcing

D. Supportive Accounting Information for Outsourcing

E. Strengths and Weaknesses of Outsourcing

F. Summary

XI. Transforming Operations Accounting

Introductory Material

A. Introduction to Transforming Operations Accounting

B. Cost Assignment Within a Flow Environment

C. Cost of Materials

1. Traditional Accounting for Materials

2. Transitional Accounting for Materials

a. Single-Level Bill of Materials

b. Approved Vendors

c. Scrap and Rework

d. Audit Trail and Internal Control

e. Accounting Transactions

3. Future Accounting for Materials

a. Eliminating On-Site Material Stores

b. Backflush Accounting

c. Audit Trail and Internal Control

d. Accounting Transactions

D. Labor Costs

1. Traditional Accounting for Labor

2. Transitional Accounting for Labor

a. Accounting Treatment

b. Audit Trail and Internal Control

3. Future Accounting for Labor

a. Audit Trail and Internal Control

b. Accounting Transactions

E. Manufacturing Overhead Costs

1. Traditional Accounting for Manufacturing Overhead

2. Transitional Accounting for Manufacturing Overhead

a. Importance of Cost Behavior

b. Audit Trail and Internal Control

c. Accounting Transactions

3. Future Accounting for Manufacturing Overhead

F. Another Look at Capacity

G. Periodic Operational Reporting Within a Flow Environment

H. Summary

XII. Information For Decisions

Introductory Material

A. A Case Study

1. The Company

2. Production and Other Costs

3. Operating Results

4. A Management Discussion

5. Issues

B. Case Analysis

C. Information Required for Akcel Company Product Mix Decisions

1. Contribution Margins and Fixed Costs

2. Routings and Production Times

3. Resource Availabilities

4. System Constraint(s)

5. Non-Physical Constraints

D. Focusing Quality Improvement Initiatives

E. Investment Decisions

1. First Proposal

2. Second Proposal

F. Improving System Performance

G. Summary

XIII. Performance Measurement and Evaluation

Introductory Material

A. Performance to Budget

1. Creating the Budget

2. Meeting the Budget

B. Key Performance Indicators (KPIs)

1. Developing KPIs

2. Monitoring KPIs

C. Business Performance Management

1. BPM Design

2. BPM Reports

D. Balanced Scorecard and Various Adaptations

1. Basic BSC Variations

2. The Performance Prism

3. Five Key Principles of Corporate Performance Measurement

4. Undesirable Characteristics

5. Desirable Characteristics

E. Recommendations

1. Organizational (Internal) Reporting

2. Individual Performance Measures

F. Refining and Implementing a Performance Measurement System

G. Summary

XIV. Closing Comments

Working Papers


WORKING PAPERS

TABLE OF WORKSHEETS

Worksheet 1 Glossary

Worksheet 2 TRIZ

Worksheet 3 FATTOFIT Corporation: Impact of Inventory Reduction Program

Worksheet 4 Executive Summary of the 14 Toyota Way Principles

Worksheet 5 FATTOFIT Corporation: Impact of Inventory Reduction Program Using Variable Costing

Worksheet 6 Outsourcing Questionnaire

Worksheet 7 Backflush Accounting With a Material Stores Account

Worksheet 8 Akcel Company, Inc., Case Data

Bibliography

OFFICIAL

Accounting Research Bulletins

Securities and Exchange Commission

Statutes

U.S. Government Materials

UNOFFICIAL

Articles, Books, and Miscellaneous