Management and cost accounting
Recent changes in ownership at this £10m turnover fabrication company highlighted the fact that management accounts and product costings were inaccurate, inconsistent and confusing.
The new Chief Executive had other European business interests, meaning that his time on-site was limited and he required concise and meaningful reports that allowed him to manage the business from a distance.
The company operates in an extremely price sensitive market, where accurate costs and controls are crucial to maintaining profitability. The products were relatively easy to replicate and competitors were beginning to undercut prices in certain areas.
We were asked to devise an up-to-date and accurate product costing system and to simplify management accounts and other controls.
In terms of product costing, the raw material prices were constantly fluctuating and several new costings were required on a daily basis. To combat this, we provided the raw data and produced a series of simple spreadsheets that allowed the main variables to be keyed-in and a selling price calculated in a matter of seconds!
Management accounts and controls had expanded over the years to the point where the weekly report ran to 12 pages - most of it going un-read. This was condensed to a single page that was linked to the main accounting program, meaning that additional clerical work was no longer needed.
Overall, there was a reduction in administrative staff in conjunction with increased control of the business and several other benefits. The project was self financing with a payback of three months.