The price list says one margin. The batch record says another.
Chemical and pharma companies usually price on a standard cost. But every batch is different: yield varies, solvents are recovered at different rates, some batches are reworked and some fail. The real margin is in the batch records, not the price list, and it's rarely added up.
Add imported key starting materials priced in dollars, inspections and filings that cost money years before they pay back, and export buyers who take 90 days or more, and a profitable company can be short of cash for years. A biochemicals client describes the change structured reporting brought:
Their structured MIS reports have given us clear visibility into our business performance, enabling faster and more informed decisions. The budgeting and cash flow monitoring system introduced by their team has helped us plan our funds more effectively and manage our operations with greater confidence.
Quoted word for word from our clients. Some quotes use our former name, Soatech.
Follow ₹100 crore of sales through a typical intermediates maker
Here is the cash cycle of an illustrative maker of pharma intermediates selling in India and abroad:
At ₹100 crore of sales a year, 120 days means about ₹32.9 crore is permanently tied up in the cycle. That is what your bank limit and your own capital are really funding. Cut customer credit by 15 days and about ₹4.1 crore comes back, with no new loan and no new customer.
Illustrative composite figures, not a client's. Your own cycle comes straight from your balance sheet: stock, receivables and payables, each divided by a day's sales or purchases.
Six money problems specific to chemicals and pharma
Yield and solvent recovery
Two points of yield can be worth more than a price increase. We cost each product by batch, including recovery, rework and failed batches.
Imported raw material and currency
Key starting materials priced in dollars and often sourced from one country leave you exposed. We track net currency exposure and input prices, and reprice in time.
Stock valuation and stock audits
Material near retest, rejected batches and valuation at selling price instead of cost all create stock-audit surprises. We keep valuation consistent across books, MIS and the bank.
Regulatory and capacity spending
Inspections, filings, validations and new reactors need money long before they earn. We separate and fund them properly.
Long export cycles
Regulated-market buyers pay slowly. We plan export finance and track every invoice.
Effluent, power and compliance cost
Effluent treatment and power are large and growing costs. We cost them per kilo and include them in pricing.
Want a CFO to look at your numbers?
A senior CFO reviews your figures with you and shows you where to improve. No cost, no obligation.
How we bring batch-level clarity to a chemical company
Batch costing
Material, yield, solvent recovery, utilities and labour for every batch, rolled up by product.
Product and customer contribution
Which molecules and buyers earn money after all of it.
Exposure tracking
Imported purchases, export receivables and net currency exposure, monthly.
A stock statement you can defend
Prepared from reconciled books, valued at cost, with slow and expired stock removed.
Capex and regulatory planning
Projects funded with term debt and equity, not the CC.
Check your own numbers
See what a stock audit or old receivables do to your drawing power:
Ask CFOAvatar about your plant
What clients say
Some of the businesses we work with.
They have facilitated us in putting both process and financial systems in place as well as take some very difficult but required decisions. We are indeed pleased to record our appreciation of their individualized, friendly and timely support in our activities during the course of their association.
Soatech’s thorough Business Assessment opened our eyes showing us several areas to improve resource utilization, follow statutory compliance, optimize cash flow. Soatech asked us several tough questions that every business owner should ask themseves. I believe implementation of just a few suggestions given by Soatech team could save us multiple times of fees we would pay them.
Quoted word for word from our clients. Some quotes use our former name, Soatech.
Questions owners ask us
How should a chemical company cost its products?
By batch, using actual yield, solvent recovery, utilities, labour and rework, then rolled up by product and customer. Standard costing alone hides the batches that lose money.
Can you help with a stock audit?
Yes. We reconcile the stock statement to the books, value stock consistently at cost, remove slow and expired material, and explain any correction to the bank before the auditor does.
Do you work with formulation and API exporters?
Yes. We plan export finance, track receivables by buyer and market, and manage currency exposure.
