As with any industry, manufacturers have a number of unique bookkeeping challenges and requirements.

With a large number of manufacturers operating multiple shifts, 24 hours a day, it’s important to measure costs per hour of production and operational efficiency in order to ensure that your business is running optimally at all times.

It’s also vital that you avoid unnecessary costs, seek out ways to increase your profitability, and plan ahead.

As such, it’s imperative you ensure your business gets its bookkeeping right – especially when you’re working with such high volume product turnover.

A professional with experience in manufacturing bookkeeping will help you get your business’s manufacturing bookkeeping right. In addition to keeping you out of trouble with the ATO, they can also provide the reports and data you need to increase your business’s profitability and efficiency, and effectively plan for the future.

EzyAccounts Manufacturing Bookkeeping

At EzyAccounts, our bookkeepers understand the bookkeeping challenges and requirements business owners in the manufacturing industry face. Whether you need assistance choosing the right accounting system for your business, or need to generate and interpret reports such as costs per hour of production or budgets and variance analyses, our manufacturing bookkeepers know how to help your business stay in shape for the long term.

Although manufacturers may face several common challenges and issues, each manufacturing business is still unique. As such, our bookkeepers always provide bookkeeping services that are tailored to suit your business’s specific needs. Depending on your preferences and requirements, we can provide on- or off-site bookkeeping.

Recently, EzyAccounts helped bring this manufacturers accounts back to the 21st century, restoring growth, reducing stress, improving efficiency, and achieving many other positive outcomes. If you’d like similar help with manufacturing bookkeeping for your business, we can help.

Manufacturing Bookkeeping

Common Manufacturing Bookkeeping Problems

In addition to the challenges posed by low margins, many manufacturers encounter one or more of the following bookkeeping problems:

Incorrect BAS lodgements due to mismanaged allocations of the split between GST-inclusive and GST-exclusive supplies, especially in regards to imported and exported products (this can lead to problems with the ATO)
Payroll issues such as the incorrect handling of superannuation for overtime payments
Inadequate debtor control, which has a negative effect on your business’s cash flow
Lack of planning or ineffective planning
Inadequate documentation to support audit trails during ATO investigations, which can create time-consuming and costly problems with the ATO

By outsourcing your manufacturing bookkeeping tasks to an EzyAccounts bookkeeper, you can be confident you won’t face any of these problems.

Pre-Opening Bookkeeping

Where possible, bookkeeping and financial reporting should take place before your manufacturing plant opens. Your bookkeeper should identify and set up the ideal software solution for your business’s needs, assist in implementing stock control systems for supplies, and identify and plan for key staff considerations.

By approaching the opening of your manufacturing business in this way, you’ll be starting on the right foot, laying the foundations for your business’s success.

Bookkeeping For Existing Manufacturers

If your manufacturing operation is already established, you can still introduce and enjoy the benefits of good bookkeeping practices and procedures. By setting up the right software, bringing your books in line with ATO and best practice guidelines, and starting to generate the right financial reports and plans, you can be confident you’ve set your business on the right course for long-term success.

Choosing The Right Software

Regardless of whether your manufacturing plant is yet to open, or has been operating for several years, it’s imperative that you use a bookkeeping software program that’s tailored to your business’s unique needs.

With the right software in place, you can more easily get your books up-to-date and in line with any compliance requirements. The right software will also allow you to generate the right reports you need to make informed decisions for your business.

Introducing Financial Reporting

Once your books are up to date, you can introduce financial reporting. Financial reporting provides you with the information you need to make informed business decisions, and to improve your manufacturing efficiency and profitability.

As a manufacturer, your bookkeeper should run several reports to ensure you’re not driving your business blind.

Cash Flow Forecasting

Cash flow forecasting allows you to plan ahead for occasions during the week or month when your business’s cash flow will tighten before easing. Depending on the size of your manufacturing business, your bookkeeper may advise you to use weekly or daily cash flow forecasting. Either way, this will help ensure your business can pay employees and suppliers on time every time.

Efficiency Through KPI Analysis

As discussed, many manufacturers operate around the clock. In order to get the most for your business out of this 24/7 schedule, it’s imperative you ensure that manufacturing down time is kept to a minimum. Utilisation of labour cost reports are a measurement of your manufacturing efficiency. They’re an important KPI within any manufacturing business, because when production drops, so do profits.

Once you know your utilisation of labour costs, you can develop strategies for improving, then use the same measurement for determining the success of your strategies. (Read this case study to see how we improved one manufacturer’s utilisation of labour by 26%.)

Budget and Variance Analysis

Introducing budgeting and variance analyses helps you to meet your target KPIs by providing the tools and data you need to keep your manufacturing business’s costs to a minimum.

Budgeting is about planning costs and allocating the required money to cover them over a set period of time. At the end of this period, a variance analysis is used to identify and any variations from this plan. These differences can then be analysed to see what can and cannot be avoided, allowing your next budget to be adjusted accordingly.

For smaller manufacturers, EzyAccounts recommends using a monthly budget and variance analysis. Larger companies may need a weekly budget and variance analysis, as your larger turnover means that waiting a month to identify problems with a cost category could allow the problem to grow to a much more damaging degree. Your bookkeeper will advise you on whether your business should conduct monthly or weekly budgeting and variance analyses.

Payroll & Scheduling

Scheduling your staff is never easy. However, this is something you must get right, as your business relies heavily on staff for producing the end product you sell.

It’s important to understand that staff scheduling isn’t just about having bodies on the production line. Instead, it affects the financial side of your business in several ways. Scheduling (and therefore paying) too many staff can wipe out your profits. Conversely, if you fail to schedule enough staff, your rate of production can drop to a level where supply contracts aren’t met.

As if this weren’t already enough to deal with, you must also be careful with staff working overtime. In any manufacturing plant, your staff will often work overtime to ensure orders are delivered on time. Applying penalty rates and superannuation to overtime payments is complicated. However, you must get this right if you wish to keep your business compliant with tax and superannuation laws.

A professional manufacturing bookkeeper can help your business properly deal with all of these challenges.

Your Manufacturing Company

Do you want a manufacturing bookkeeping service that’s tailored to your business?

Our bookkeepers would be happy to discuss how we can help your manufacturing business keep your books updated and produce the reports you need to increase your profitability and efficiency. For a confidential discussion about your bookkeeping needs, call EzyAccounts today on 1300 313 397.

Recommended Packages

We recommend the following bookkeeping packages depending on the size of your manufacturing plant. (For a tailored recommendation, contact us today.)

0-5 Employees

• Monthly bookkeeping (on- or off-site)
• Full payroll management
• BAS lodgement
• Rolling 12 month cash flow forecasting, showing monthly monetary movements
• 12 month forecasted budgeting, with monthly variance analyses
• Monthly efficiency and utilisation analysis to facilitate process improvement

6-20 Employees

• Weekly bookkeeping (on- or off-site)
• Full payroll management
• Staff scheduling assistance (if required)
• BAS lodgement
• Rolling 12 month cash flow forecasting, showing weekly monetary movements
• 12 month forecasted budgeting, with weekly variance analyses
• Monthly efficiency and utilisation analysis to facilitate process improvement

20+ Employees

• Weekly bookkeeping (on- or off-site)
• Full payroll management
• Staff scheduling assistance (if required)
• BAS/IAS lodgement
• Rolling 12 month cash flow forecasting, showing daily monetary movements
• 12 month forecasted budgeting, with weekly variance analyses
• Weekly efficiency and utilisation analysis to facilitate process improvement

To discuss an appropriate bookkeeping package for your manufacturing business, call EzyAccounts today on 1300 313 397.