The benefit of partnering with manufacturing accounting specialists

Manufacturing is a unique industry… unlike retailers that sell merchandise and service based businesses that sell their time and expertise, manufacturers build new products.

They create items from raw materials and have a variety of processing and inventory controls.

Accounting for manufacturing is complex because not only do you have to manage the cost of incoming materials, but there are also production costs, inventory control and of course, determining the appropriate final price of the products you manufacture.

Marius Fourie, Director and Business Advisor, discusses the benefit of partnering with manufacturing accounting specialists and how North Advisory is ready to help you.

Process costing is more commonly used when you are manufacturing multiples of a single item. If you have a production line manufacturing hundreds or thousands of the exact same product, this is a more appropriate accounting method. It calculates cost based on the manufacturing stages and helps to maintain uniformity as each job will essentially cost the same per unit – it is just the quantity manufactured that varies.

You can also use activity based costing if you want to really fine-tune your figures, because it takes into account indirect costs such as utilities, wages and business administration costs. This method can really help you enhance your data, as it produces highly accurate results.

Asset protection is an absolute must have for manufacturers. Without your machinery and equipment, it’s unlikely that your business would be able to continue, so it’s critical that you have the correct insurance to cover all possibilities.

Marius says it’s important to consider what additional protection your manufacturing facility might require too.

“Depending on the size of your manufacturing business, you might need to think about hiring security to monitor the plant. And if you have a significant amount of machinery, it’s a good idea to have a regular maintenance program in place with your supplier. This can help minimise the potential for breakdowns.”