Made-to-order manufacturing can easily turn into a nightmare even when Halloween isn't just around the corner, learn how to get off the scary path.
If you advise a manufacturer that builds to order, you have probably heard some version of this at month-end: "The numbers will be ready once we figure out where that job landed." Make-to-order and engineer-to-order shops do not sell from a shelf. Every job is a little different, so the usual inventory-driven playbook does not always fit. The productivity losses tend to follow a few familiar patterns, and each has a practical fix.
A job is quoted at a healthy margin. Material prices shift, the shop floor runs extra hours, and rework slips in. Nobody sees the margin eroding until the books close. By then, it may be too late to do much about it.
In IndustriOS, labor and material are recorded against the job as the work happens, so estimated and actual costs can be compared while the job is still open. With the new WIC Dashboard and Insights, owners and their advisors can see margin by job without waiting for someone to build a separate report.
Work in progress is where custom manufacturers' balance sheets can get fuzzy. When production data lives in one place and accounting in another, WIP becomes an estimate at best, and a plug at worst. Accountants can end up spending the close week reconciling numbers instead of helping clients understand them.
IndustriOS tracks WIP at the job level from the same transactions that drive production, then passes the financial results to the accounting system the client already uses, including QuickBooks Enterprise and Sage 300. The client keeps the general ledger they know, while the accountant gets a WIP figure that ties back to real activity.
In many small shops, quoting depends on one experienced estimator and a folder of past jobs. That makes quoting slow, and difficult to hand off. When an estimate is wrong, the problem may not become obvious until the job is already underway.
Because IndustriOS keeps the history of what similar jobs actually cost, estimators can use real results rather than relying on recollection. Better-grounded quotes can help reduce the risk of winning work at a margin that does not hold up once production begins.
Almost every growing manufacturer has one: the scheduling sheet, the cost tracker, or the "real" backlog report, maintained by one person and understood by no one else. It works until that person is on vacation.
The problem is not necessarily the spreadsheet itself. It is what happens when an important part of the business depends on one person knowing how it works. Bringing scheduling, purchasing, and costing together gives the rest of the team access to the same information. WIC's Queries feature also lets users interact with that data without exporting it to Excel first.
For accountants, these problems can show up as late closes, restated margins, and clients making pricing decisions with information that is already out of date. More reporting after the fact does not solve the underlying problem. The operational data needs to be captured where the work happens and connected to the financial picture while it is still useful.
That does not necessarily mean replacing the accounting system a client already knows and trusts. For custom manufacturers, the bigger gap is often the operational detail around it: jobs, WIP, scheduling, purchasing, and costing. When those activities are connected to accounting, month-end can become more about reviewing what happened and less about trying to reconstruct it.
Many of our customers have been with us for close to two decades. For manufacturers that build to order, having operations and accounting working from connected information makes it easier to understand what is happening in the business before month-end arrives.
IndustriOS is an Oakville, Ontario-based ERP provider serving small and mid-sized make-to-order and engineer-to-order manufacturers across North America.
Disclosures:
This feature (including some graphics) was adapted (in part) from content contributed by the author on behalf of Industrios Software, along with media from the Industrios website. The article is provided solely for informational and educational purposes. Its publication does not represent an endorsement by Insightful Accountant or the author.
IndustriOS is an Oakville, Ontario-based ERP provider serving small and mid-sized make-to-order and engineer-to-order manufacturers across North America.
Any other trade names mentioned within this article may refer to products registered, trademarked, or otherwise held by their respective owners. They are hereby acknowledged as such and are referenced solely for informational and educational purposes.
This is an editorial feature, not sponsored content. No vendor associated with this article has paid The ERP Update, or Insightful Accountant any form of remuneration to be included within this feature.
Note: Registered Trademark ® and other registration symbols such as those used for copyrighted materials, have been eliminated from the articles within this publication for brevity due to the frequency or abundance with which they would otherwise appear or be repeated. Every attempt is made to credit such trademarks or copyrights within our respective article footnotes and disclosures.