Product cost based on stale assumptions
Standard costs set years ago and never updated, so margins reported are fiction.
Manufacturing
Manufacturing
Producers and processors where product cost is built, not bought — and usually calculated wrongly.
Who this is written for: Managing directors, production managers, plant accountants and operations leads.
How this sector actually operates
In manufacturing the cost of a product is constructed from materials, labour, overheads, yield and waste. Most manufacturers know their selling price precisely and their true cost approximately. That gap distorts pricing, product mix, make-or-buy decisions and quotation. It also means the stock valuation in the balance sheet rests on assumptions nobody has tested, which becomes a problem at audit and a bigger problem when a lender asks.
The problems we address in this sector
These are the issues that recur. They are described as sector problems, not as claims about clients we have worked with.
Overhead absorption that nobody can explain
A rate applied because it was applied last year, distorting cost between products and periods.
Yield and waste unmeasured
Actual output against expected output is not tracked, so material loss is invisible until the purchase order budget is exceeded.
Work in progress valued arbitrarily
WIP carried at a round figure, which moves profit between periods without anyone deciding it should.
Raw material planning by memory
Purchasing driven by what is running low rather than by the production plan, causing both stockouts and excess.
Quoting without real cost
Quotes built on estimated cost, so profitable-looking orders turn out not to be.
Downtime and inefficiency uncosted
Machine downtime, changeovers and rework are treated as normal rather than measured and reduced.
The work that follows
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Bill of materials and standard cost review
Testing BOMs against actual recipes and routings, and rebuilding standard costs from current material prices, labour rates and a defensible overhead basis.
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Product costing and margin analysis
Full cost by product — material, labour, overhead, waste — with contribution analysis to support pricing and product mix decisions.
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Overhead absorption design
An absorption basis that reflects how resources are actually consumed, documented so it can be explained to an auditor or lender.
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Yield, waste and variance reporting
Actual against standard for material usage, labour hours and output, with variance analysis that points to a cause rather than just a number.
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WIP and finished stock valuation
A valuation method that is defensible, consistently applied and reconciled to physical stock.
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Material planning and purchasing control
Linking purchasing to the production plan, with reorder discipline, supplier price monitoring and approval controls.
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Quotation costing support
A costing routine for quotes that reflects real cost, capacity and the margin the business needs.
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Production reporting
Output, downtime, rework and efficiency reporting that supports operational decisions as well as the accounts.
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Systems configuration
Configuring BOMs, routings, work orders, production planning and cost centres in the ERP so the data is captured as work happens rather than reconstructed afterwards.
The reporting pack we would build
Reporting is where sector knowledge shows. A generic management pack tells every business the same thing; a useful one reflects how your sector makes money and where it loses it.
- Standard against actual cost by product with variance analysis
- Material yield and waste by production run
- Overhead absorption and recovery analysis
- WIP and finished goods valuation reconciled to physical stock
- Production output, downtime and rework
- Contribution by product and product group
- Raw material commitment and stock cover
Platforms and services for this sector
Platforms commonly used in this sector
Services we apply here
ERP & Accounting Software Implementation
Most businesses do not fail with software because they bought the wrong product. They fail because nobody designed how the business would run inside i…
Service detailAccounting & Bookkeeping
Bookkeeping is not data entry. Done properly it is the discipline that turns daily transactions into numbers a managing director can rely on. We run t…
Service detailBusiness Process Improvement
Software only automates the process you give it. If the process is unclear, undocumented and dependent on individuals, the system simply records the c…
Service detailFinancial Advisory & Risk Management
Advisory work is useful when a decision has to be made and the numbers behind it are not clear. We analyse the position, model the options, quantify t…
Service detailStatutory and technical considerations
Stock and WIP valuation must follow a consistent, defensible basis and be reconciled to physical counts. Where standard costing is used, variances must be dealt with appropriately at period end rather than left to accumulate. We document the costing basis so it can be explained to auditors, lenders and tax authorities.
We do not publish rates, thresholds or deadlines on this website, because a figure that is out of date is more damaging than no figure at all. Where specific figures matter, they are given in an engagement against the position in force at that date.
Questions we are asked in this sector
Our standard costs are years old. Where do we start?
With the bills of materials, because everything downstream depends on them. Then current material prices, labour rates and a defensible overhead basis. Until standard costs are credible, every margin and variance report built on them is fiction.
Do you already work with manufacturing businesses?
This page describes the operating problems and reporting needs we understand in this sector, and the work that follows from them. It is not a claim about named clients. If you want references in your sector, ask us directly and we will tell you honestly what we can provide.
Do we need an ERP, or is accounting software enough?
It depends on whether your reporting relies on operational data — stock, jobs, production, projects, grants. If it does, accounting software will leave you assembling that data by hand every month, and an ERP is usually the cheaper option over three years. Use the solution finder for a preliminary view, then let us assess it properly.
Can you work with the system we already use?
Usually, yes. We review the configuration and the processes around it first, because many problems described as software problems are configuration or process problems. Where a rebuild is genuinely needed we will say so.
How long before we see a difference?
Some things are quick — a daily reconciliation routine, a proper aged receivables report, an approval framework. Others take a full cycle or two, particularly where data has to be corrected first. We set expectations in the scope rather than promising a timeline we cannot control.
What do you need from us to start?
A named person who can make decisions, access to the records and the systems, and time from the people who do the work. Implementation and process work fail on availability more often than on anything else.
Let’s build a stronger financial foundation for your business.
Tell us what you are dealing with. We will tell you honestly whether we can help, what it would involve and what it would cost.