Your P&L says the year was fine. It can't tell you which parts paid for it.
A typical Indian engineering MSME makes hundreds of part numbers for a few dozen customers. The annual accounts add them all together. So a profitable year can hide parts of the range that lose money, carried by a few high-margin parts that a competitor could take tomorrow.
When we start with a manufacturer, the first question is never "what was the profit?". It's "what does an hour on each machine earn you, on each part, for each customer?". Almost nobody can answer it on day one. Our clients put it better than we can:
Their insights led us to monitor margins on a detailed customer-wise and product-wise basis, providing clarity we never had before. Their proactive approach has been instrumental in identifying areas for cost control.
Quoted word for word from our clients. Some quotes use our former name, Soatech.
Get the shop floor into the numbers
Finance can't fix what the plant doesn't record. So the first 90 days are about data that already exists but never reaches the accounts:
Output and idle time
Shift-wise production against machine capacity. Idle time is a cost you're already paying; it just has no line in the ledger.
Rejections, rework and yield
Metal in, good parts out, scrap sold. A 3% swing in yield can be the whole profit on a part.
Contract labour and overtime
Tracked by line and by order, not lumped into "wages". This is where cost quietly grows when orders are rushed.
In production, clear performance measures were introduced. A proper system was set up to collect data from the shop floor, making it easier to track output, idle time, and wastage. This has helped us control costs and improve efficiency.
Their regular monitoring of production expenses, including contract labor and overtime, has given us a granular view of our operations, paving the way for efficiency and cost savings.
Quoted word for word from our clients. Some quotes use our former name, Soatech.
Where you already run an ERP, we capture the data from it rather than adding another spreadsheet:
Lehry Valves was guided step by step by Soatech team to capture data from the ERP and Provide a financial review on the companies’ expense to income preview, the team was consistent, insight-full and persistent.
Quoted word for word from our clients. Some quotes use our former name, Soatech.
Cost every part by the machine hour
Material-plus-a-percentage costing treats a part that runs 2 minutes on a CNC the same as one that runs 20. Machine-hour costing doesn't. Here is the method, using an illustrative part:
| Part A-114 (per 1,000 pieces) | ₹ |
|---|---|
| Selling price | 1,84,000 |
| Material, net of scrap sold back | (96,500) |
| Rejections at 3.5% (material and machine time lost) | (6,400) |
| Power, tooling and consumables | (11,200) |
| Direct and contract labour, including overtime | (18,900) |
| Contribution | 51,000 |
| Machine hours used | 9.5 |
| Contribution per machine hour | 5,368 |
Run this for your top 50 parts and rank them by contribution per machine hour, not by sales. On your bottleneck machine, every hour spent on a ₹1,800-an-hour part is an hour not spent on a ₹5,400 one. That ranking decides your pricing, your minimum order quantities and which RFQs to decline.
Illustrative figures. Machine hours and yields should come from your own production records.
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.
Make OEM contracts carry their own risks
- Price-variation clauses. Link the price of steel, copper, brass or aluminium content to a published index, reset monthly or quarterly. Without one, a fixed annual price list makes you the buyer's metal-price insurer.
- Payment terms that respect the MSME rules. If you're a micro or small enterprise with Udyam registration, the law caps the credit a buyer can take at 45 days and gives you compound interest on delayed payments. If they pay you late, buyers get the tax deduction only in the year they actually pay. Mention it, politely, in every renewal.
- Tooling and development paid separately. Die and fixture costs recovered up front or amortised over a committed volume, never buried in the piece price.
- Schedule changes have a price. Expedited orders, small batches and changeovers cost overtime and set-up time. Price them.
Keep the bank on your side
Most manufacturers fund their working capital through a cash credit limit, drawn against the stock statement. If the statement overstates stock, or receivables age past the bank's cut-off, your usable limit is smaller than the sanctioned one. Check yours:
For the full method, including how to present a limit enhancement, read Why is my CC limit always full?
Ask CFOAvatar what your plant earned yesterday
What manufacturing clients told us changed
Some of the businesses we work with.
We now prepare monthly business plans that clearly show revenue, costs, and final profit. This has helped us plan better and avoid last-minute surprises.
We now review sales every month by segment and geography, which has helped us focus on the right markets. Regular monthly reviews with the sales team have improved accountability and progress tracking.
Thanks to CFOSurge, we now know exactly what each product contributes to our bottom line. Our sales team operates with clear geography-wise data, our accounts are well-maintained, statutory payments are handled systematically, and our inventory is finally accurate. They didn't just fix our books—they helped us plan for growth.
Quoted word for word from our clients. Some quotes use our former name, Soatech.
Free templates for manufacturers
Questions owners ask us
What does a CFO do for a manufacturing company?
A manufacturing CFO sets up product and customer costing (ideally by machine hour), brings production data such as output, idle time, rejections and contract labour into a monthly plan, manages working capital across stock, WIP and receivables, prices metal and input risk into contracts, and keeps the bank's stock statement and drawing power in order.
Can you work with our ERP or Tally setup?
Yes. We capture data from the ERP or Tally you already use, as we did step by step for Lehry Valves Instruments. CFOAvatar connects to it for daily dashboards.
We supply OEMs who pay in 90 days. What can we do?
If you're a micro or small enterprise registered on Udyam, the MSMED Act limits buyer credit to 45 days and entitles you to compound interest on late payment, and the buyer's tax deduction for amounts paid late waits until the year it actually pays. A CFO uses that in negotiations, tracks overdue OEM invoices against the bank's age cut-off, and can arrange invoice discounting on TReDS where it's cheaper than your CC.
How quickly will we see product-wise profitability?
Usually within the first 90 days. Month one rebuilds the costing base, month two runs the first product and customer contribution report, and month three uses it for pricing and order decisions.
