Today, it’s a fast-paced business world. As change continues to add uncertainty to businesses across industries, finance leaders are tasked with effectively analyzing, monitoring and predicting the financial performance of their organizations with a new level of granularity. For manufacturing and distribution organizations, this can be especially challenging. Multiple entities, products and projects, payroll variations for different groups and changing workforce needs to meet anticipated production requirements all add complexity. And revenue can come from multiple sources and may be based on utilization or percent of completion.
Manufacturing facilities must consider their production line capacities, their customers’ end product projections, and fluctuating material costs as they design their revenue goals and inventory requirements. That’s a lot of moving parts. Then, depending on where the manufacturer is located, there could be additional taxes, regulatory fees, etc. that also need to be added to costs throughout the production stages in order to comply with regulation and remittance requirements. If you don’t develop your budget incorporating these taxes and/or fees, how are you going to make a valid comparison of your budget against your actuals?
We’ve had many conversations with our customers and there are several common pain points that we are hearing when it comes to putting together an accurate manufacturing budget and plan that can be relied upon to maintain stability and support growth. Oftentimes the level of detail and accuracy required is either not supported by current systems or it’s very manual and time consuming to pull together in the case of Excel or spreadsheet tools. These common budgeting and planning pain points include not being able to:
- Budget by product SKU, product lines or customer
- Track costs of goods sold
- Perform inventory planning
- Manage backlog/bookings
- Budget for overhead expenses
- Perform unit based budgeting
- Calculate gross margin
Benefits of Modern FP&A on Manufacturing Budgets
To get beyond these pain points, many manufacturing organizations are modernizing their budgeting and planning by turning to cloud FP&A solutions that not only streamline and simplify the process but also provide greater visibility into and control over every aspect of financial management and planning. Key aspects of these solutions include:
Automation where core budget and forecast processes are built in – routine tasks are performed faster, there are no broken links or formulas to maintain as is the case with spreadsheets.
Visibility which allows you to integrate and normalize data from multiple sources, ensuring accuracy and increasing line of sight into current and future financial health.
Collaboration where you can work with stakeholders quickly test assumptions and then deliver accurate forecasts with practical recommendations backed up by rock-solid data and insights.
Agility gives you the ability to connect virtually to any data source, creating a single source of truth which makes it easier to know – with confidence – what next steps should be and why.
These solutions save time by automating and streamlining routine tasks, ensure everyone is on the same page with security assigned budget versions, and can handle complicated revenue streams with built-in financial logic. Most importantly modern FP&A supports budgeting to any level of detail and makes it easy to reconfigure when your structure changes – all commonplace in manufacturing organizations.
Planning Maestro: A Modern FP&A Solution for Manufacturing
Planning Maestro, our cloud FP&A platform delivers a competitive advantage through the ability to easily budget, forecast financial performance, analyze results and share critical information across the business. We have many manufacturing customers that have realized the benefits of the solution – here are a few of their stories.
One transportation and materials handling customer was struggling with trying to create a business budget that was precise enough to accurately manage the organization’s operational and financial needs. Which for this industry, is not that uncommon.
Some of the challenges they faced were creating functional manufacturing budgets that intimately tied their production volumes to their customers’ needs while meeting their regulatory and analysis requirements.
This customer had received a significant investment to grow their business so keeping a close eye on cash flow and the returns they’d receive was critical. Fortunately, with Planning Maestro, users are able to produce double-entry accounting transactions when you budget so both a cash flow and a detailed balance sheet are produced as each entry is made. That saved them a significant amount of time that they then re-allocated toward engaging in additional analysis and optimizing their operational projections.
Another customer , Price Family Vineyards & Estates, a winery in Sonoma County California, had been using Excel for budgeting and as the business grew, so did the complexity of their budget. All budgeting, forecasting, and reporting data would be manually entered from their accounting software reports to see how they were tracking to plan. If something was off, it meant searching to find the dollar amount within the hundreds of GL accounts in the budget. Then when multiplied by multiple LLCs – they were spending days upon days to get the reports completed.
“Our winery budgets are quite extensive. Prior to Planning Maestro I’d have a spreadsheet with 20 tabs, all of which were linked to a GAAP-based P&L on the first tab. I’d spend hours pulling all the information to it, and once I did, I’d spend more hours ensuring it proved out,” said Shelly Golly, Controller.
Now, when she enters the data into QuickBooks, it flows into Planning Maestro and updates all of her financial statements automatically, following the business logic of each entity. What used to take days to create reports to present to management now takes a few hours, from the time she updates the data, reviews it, and distributes among the managers.
“Now more of my time is spent focusing on analyzing the data,” she said.
When it comes down to it, we know that business budgeting and forecasting aren’t one day events. Yes, annual budgets must be nailed down and approved but changes will happen. If your customer’s order increases by one bus, airplane, or production line; your labor, materials, inventory, costs and expenses will change. Using tools that effectively manage those changes without falling apart could be worth its weight in gold.
Centage provides modern FP&A software solutions that empower Finance teams to lead the way to a stronger, more agile business. Our cloud platform, Planning Maestro, makes sophisticated budgeting, planning, and forecasting easy and accessible. Intuitive automation accelerates workflows and improves accuracy, enabling Finance leaders to deliver reliable information and meaningful insights at the speed of today’s business. For more information on how to modernize your FP&A process, view our product demonstration video, or call 800-366-5111.
