How a Rigorous Cost Accounting System Transformed a Manufacturing Business

A few months ago, I was hired by a manufacturing company led by seasoned experts with decades of experience in the industry. Despite their knowledge and strict cost-cutting policies in office expenses, the business wasn’t as profitable as expected. They brought me on board to figure out why.

After implementing a meticulous system of cost accounting and financial analysis, leveraging the project accounting feature in QuickBooks Online, we uncovered several key insights:

1️⃣ Overestimated Productivity in Direct Labor:The company was sourcing raw materials that required internal preparation, thinking it would save costs. However, this manual effort was slowing down productivity. My analysis revealed that purchasing pre-treated materials significantly boosted the team’s output while maintaining competitive costs.

2️⃣ Inventory Losses Due to Inefficiencies:The company lacked an effective inventory replenishment system, leading to spoilage and material deterioration. By addressing this, they drastically reduced waste and optimized their production flow.

3️⃣ Neglected Equipment Maintenance:Cost-cutting in maintenance had resulted in frequent equipment downtime, forcing employees to spend time manually fixing production issues. By investing in regular maintenance, they improved operational efficiency and employee productivity.

After implementing these changes, the company reduced its manufacturing costs by over 25% within eight months, all without increasing product prices.

This experience highlighted a vital lesson: business owners must rely on data-driven systems and processes to make strategic decisions. And the best part? Doing so doesn’t require significant increases in operational expenses or staff.

With BPO Outsourcing Solutions, you can achieve these results while focusing on growing your business. Let’s connect and explore how we can help you take your business to the next level!

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