How a West Michigan Manufacturer Cut Cost Variances From ~33% to ~1% (CASE STUDY)
A West Michigan manufacturer couldn't fully trust its financial reporting or its standard costs. Here's how Bridge helped close those gaps in about three months.
Industry: Manufacturing (discrete make-to-order)
Annual revenue: $20M
Location: West Michigan
Engagement length: About 3 months
The Situation
The CEO of a West Michigan manufacturer was concerned about the integrity of the company's financial reporting and the accuracy of its standard costing. Bridge was engaged to review the company's financial practices and standard costing, and to recommend improvements.
Our Approach
Financial reporting integrity
Met with the executive team to understand their concerns and define the scope of work
Tightened the month-end close with a hard cut-off for each financial period
Redesigned the income statement to show actual-to-standard variances by cost pool, and used trend analysis to trace unexpected swings to their root cause
Reconciled all major balance sheet accounts and confirmed accruals and reserves were appropriate
Standard costing and margin reporting
Reclassified income statement costs, then calculated new standard rates and loaded them into the ERP system
Built standard margin reporting by sales channel and customer, down to individual product lines, supported by new data attributes on customers and products
The Results
Variances cut from ~33% to ~1% of standard costs.
Financial results now have high integrity and are prepared on time.
A highly accurate standard margin analysis tool now lets leadership analyze margins and take targeted action to improve profitability.
In the Client's Words
“Greg, you helped us navigate a challenging transition and highlighted significant gaps in our accounting/finance staff capabilities, financial practices, integrity of the financial reporting, and standard costing methodologies. Your leadership in getting these areas on track is much appreciated. I would like you to remain engaged with us in an advisory capacity. Now that we have a meaningful standard margin analysis tool, I would like you to initially focus on reviewing product profitability by product family, so we have a much clearer understanding of our true costs, margins, and profitability across the business.”
Is Your Finance Team a Full Partner?
Timely, high-integrity financial reporting is the minimum a finance function must deliver. The real value comes from using that data to understand how the business is performing.
Not sure whether your finance team is a full partner in the business, or whether it could be adding more value? Let's talk.
