At small manufacturing companies, employees often wear several hats. We regularly talk to small manufacturers like you, and hear time and time again the same primary challenges and issues. You frequently tell us that Kathy in the front office handles accounting, while Jeff the foreman quotes jobs. Often, Kathy will use QuickBooks, and Jeff will set up an Excel spreadsheet, leading to a general disconnect and a lack of transparency into the business. This disconnect leads to three big problems that can affect profitability of the business:
1. Job costing vs. accounting. If Jeff on the shop floor is using an Excel spreadsheet to keep track of costs, including materials and labor, and Kathy is using QuickBooks at her desk, neither of them have a true picture of what it really costs to manufacture the latest round of widgets. The costs on Kathy’s income statement don’t match up with the costs on the shop floor specifically related to the job. Using one system lets manufacturers keep track of how much time is spent using each machine and how much labor is actually going into each order, which helps reconcile the actual job cost to the profit margin on the job.
2. Quoting. For most small manufacturers, quoting is a Catch-22: if you don’t submit the quote in time, you might lose the job – but if you don’t quote accurately, you lose money. When Jeff has to compile information from his Excel spreadsheets, previous invoices, and information that Kathy prints out from QuickBooks, it’s difficult for him to expedite the process. Using one system that saves quotes and keeps track of existing jobs helps Jeff accurately predict labor and materials costs and profit margins.
3. Inventory control. Manufacturers need to know how much to order, particularly when too much inventory ties up cash. A single system lets you see how much you’ll need for the jobs currently in the queue and how soon existing inventory translates into cash.
These challenges are something small business manufacturers must address on a daily basis. While the answer is not simple, using one, comprehensive system that manages the business can allow manufacturers to attack these problems effectively, increasing and expediting cash flow while maintaining quality. As a small business manufacturer, what challenges do you typically face? We’d love to hear your thoughts.
Steve Leavitt, GM of U.S. Cloud Solutions for Exact