CPA Interview Reveals Biggest Profit Killer in Manufacturing

Biggest-Profit-Killer-in-Manufacturing

You are likely well aware of the myriad of ways profits can be sucked out of your manufacturing business. Overhead comes in various forms, and just when you think you have things under control, you discover another leak. But what is somewhat surprising is that it is not overhead that is the biggest profit killer in manufacturing. According to at least one manufacturing CPA, the biggest profit killer in manufacturing is not knowing the TRUE costs of the products they are selling.

eric_fischer_cpaEric Fischer is a Tax Senior Manager at BDO USA, LLP in Grand Rapids. He is also a Board Member, Secretary and Treasurer of the West Michigan World Trade Association. In a recent interview I had with him, we discussed various facets of accounting in manufacturing. The Michigan State grad has lots of experience in the area and I found what he shared of great interest. His concern for manufacturers is called “cost accounting” and his suggestion that manufacturers get a better handle of the true cost of what they are selling is a solid one. Without it, it is like driving a bus with your best employees into a blizzard. Cost accounting lets them better price their products.

This doesn’t mean some products can be priced with little or no margin. If they are, however, they should be on products that lead to other business. According to Fischer “Having clear visibility of what each product costs the company to make is a must in today's competitive environment.”

Another point Fischer made in our discussion was how business is a team game. We discussed how we all understand the importance of good employees, but building a team of outside professionals is also critical. Lawyers, accountants, marketing and tax experts can more than pay for themselves in improved performance, efficiencies, and effectiveness. They can also help manufacturers from making some costly mistakes.

Experts in these areas serve the management team with an outside opinion on major moves the company may be considering prior to initiating those moves. Getting the opinion of an outside expert can prove to be invaluable to growing a manufacturing company.

If you would like to reach out to Eric, he may be contacted through his LinkedIn account. He understands business and manufacturing and has some interesting insights. He is worth having a conversation with.

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Isaac Oswalt

Owner of 21 Handshake, a strategic marketing company, driven to grow relationship-driven businesses. Futurist in nature, Isaac displays a deep desire to preserve the human element in today's business. Trust being the ultimate currency, his clients appreciate that "new and stronger handshakes" is a success metric in their businesses.

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