Internal Reporting and Improvement Initiatives, written by Charlene S. Budd, Ph.D., CPA, Professor Emeritus at Baylor University and Charles I. Budd, Principal of Budd Management Systems, discusses popular corporate improvement initiatives and the role of internal accounting functions in implementing and maintaining these initiatives. This portfolio, explains how accounting departments can function in a business environment that is demanding more real-time information and less historical accounting information.
This Portfolio's primary intended audience is all accounting personnel, including controllers and CFOs, and interested senior management. Its purpose is to provide a quick study of the newest management philosophies and provide assistance in helping develop metrics that support their successful implementation.
However, non-financial executives who are not familiar with the new management philosophies covered here also might find reading this Portfolio interesting and rewarding.
This 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.
This 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.
Internal Reporting and Improvement Initiatives 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. It 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 will question the assumptions that lead to many traditional accounting actions, such as preparing performance-to-budget reports when the current environment is significantly different from the one that existed when the budget was prepared and approving capital budgets that promise results that rarely become reality (and whose outcomes seldom are evaluated following investment). It also will present some tools to assist the reader in viewing management as a process.
Internal Reporting and Improvement Initiatives allows you to benefit from:
This Portfolio is included in the Accounting Policy & Practice Series, a comprehensive series of titles which explain, explicate, and offer commentary on a wide range of accounting and financial management topics, including revenue recognition, income taxes, leasing, business combinations, debt instruments, risk management, internal controls and more.
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
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
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
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)
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
VII. Lean Operations
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
VIII. Demand Flow
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®
IX. Theory of Constraints
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
X. Outsourcing: The Outs and Ins
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
XI. Transforming Operations Accounting
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
c. Accounting Transactions
3. Future Accounting for Manufacturing Overhead
F. Another Look at Capacity
G. Periodic Operational Reporting Within a Flow Environment
XII. Information For Decisions
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
XIII. Performance Measurement and Evaluation
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
XIV. Closing Comments
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