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A Manufacturing Budget Overhaul

Updated: Apr 16

In the intricate sphere of manufacturing, especially one involving high-end products, navigating the financial labyrinth is far from straightforward. One of our clients, a large, publicly-listed manufacturer, found itself grappling with this very challenge. Specialising in a complex range of measurement equipment, produced in a single facility, the company boasted an integrated management team overseeing Manufacturing, Purchasing, Logistics, and Engineering. The production timeline varied drastically, ranging from 4 to 16 weeks, with top-tier machines often requiring meticulous customisation.

The Financial Enigma: Unaccounted Costs in Production

On the face of it, their revenue forecasting had the sheen of reliability, thanks to an advance customer order pipeline. However, lurking beneath this surface-level clarity were nebulous financial metrics. The company relied solely on standard product costing, disregarding the additional costs arising from customisation, variances in purchasing, and logistics handling. When the monthly discussions on financial performance occurred, these sometimes substantial variances were overlooked with an air of resignation, summed up by the sentiment, "We can’t control them, so it doesn't matter."

A Pioneering Manufacturing Budget Model: The Ascern Solution

Recognising the need to make financial analytics more actionable, Ascern Advisers rolled up their sleeves and crafted an innovative budget model. The new model meticulously incorporated these overlooked cost variables into the Cost of Sales. Drawing on a blend of historical data and forward-looking estimates based on the existing order book, the new model was designed to reflect a more comprehensive financial reality.

Result: Enabling Targeted Financial Management

The transformative effect of the manufacturing budget model was immediate and tangible. Monthly financial discussions became enriched by a newfound clarity and purpose. The management team was now empowered to dissect financial variances in a meaningful way. This laser-focused scrutiny facilitated the identification of potential areas for financial improvement and cost-saving measures.

This success story underscores the value of fine-grained financial modelling, especially in industries characterised by complexity and customisation. Through strategic financial planning, even uncontrollable costs can become manageable, leading to targeted improvements and sustainable growth. This experience epitomises Ascern Advisers' dedication to elevating financial management from a mere back-office function to a strategic tool for organisational success.


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