How one company increased profits and gained insight for decision-making
We can talk about our fractional CFO services… or you can read about the results. See what we did for an area manufacturing company!
Challenge
A manufacturing company in the entertainment industry struggled with financial visibility and operational alignment. Their accounting team operated in isolation, with limited communication between finance and plant operations.
As a result, key stakeholders lacked insight into financial processes, leading to misallocations, untracked costs and inventory margins that didn’t add up. Additionally, an ERP system implemented years prior was not well suited to the company’s needs, further complicating financial tracking and reporting.
Without clear financial oversight, leadership found it difficult to make informed decisions. So they contacted us for help.
Solution
We met with key stakeholders and spent time on site to understand their operations, throughput and business processes. We conducted a deep dive into how their ERP (enterprise resource planning) system worked and how costs were tracked. We also hired a new controller for the company.
During this phase of the engagement, we saw significant variation in how accounting was treating costs vs. how they should be treated. We also realized quickly that they had $1.5 million in unallocated costs, which severely skewed their margins. And because the company had never created a budget, there was uncertainty surrounding their financial picture and inability to control costs.
Following these discoveries, we put strategies in place to capture costs properly so the company could measure each job by productivity and costs. This would allow them to identify more quickly if a job is going well or spiraling out of control.
Result
The company quickly saw margins improve by three points. Additionally, we helped implement a more effective cash flow management system, providing leadership with clearer insights to ensure cash is available where and when it’s needed.
We’ve also reduced turnaround time for producing financial statements by two weeks. This allows management time to find more insights into operations — providing a crucial tool to monitor jobs more closely, help their people operate more efficiently, remedy any issues and help their company grow in value.
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