Plain English financial statements Value stream profitability is clear & under control of the value stream manager –Actual, direct costs without allocations –Costs categories related to resources Costs not assigned to the value stream are shown where the costs are incurred. The amount of cash spent during the period is clear.
Cash-based financial reporting The reduced time that products spend in the value stream and the stability of lean processes make cash-based financial reporting possible. The preparation of financial statements is simplified because the financial effects of inventory is reduced. Cash basis value stream profit must be adjusted for changes in inventory balances to arrive at GAAP profit.
Month-End Inventory Reconciliation The difference between value stream cost of goods sold ($1,726,076) and GAAP cost of goods sold (1,948,963) is $222,887, the reduction in inventory This is because the value stream P&L recognizes expenses in the period the cash was spent This proves the reconciliation meets the matching principle Beginning Inventory $ 1,186,035 + Value Stream Costs 1,726,076 Subtotal 2,912,111 Less: Ending Inventory ( 963,148) GAAP Cost of Goods Sold $ 1,948,963