Manufacturing businesses have to deal with a host of accounting considerations that digital and service industries don’t.
We speak to Angela Ashworth, co-founder of accountancy firm Purple Lime, about the differing challenges for small manufacturing businesses and getting the right cloud accountancy software.
Manufacturing vs other industries
You have a lot more areas that need to be tracked, basically. This is especially true if you’re making components then retailing them. You need to be clear on the margins relating to the cost of purchased items.
With a service, you’re often considering how to price it and you’re often considering time. With products, you need to make sure you’ve made your growth margin on that product as well as factoring in the time that it’s taken to make that product.
Finding the right cloud-based accountancy software
Traditionally, people could have very complex systems built to deal with the manufacturing side of their processes to track all of these things.
With all the cloud-based technology and innovation that is around now, there are a lot more things that are offered in a software service that businesses – particularly small businesses – can be using. They often integrate with whatever cloud accounting system that the firm has.
There are different types of software available as well, depending on what the type of manufacturing you do – like the fashion industry. I know that there are several to do with retail too.
Each app will have its own specific functionalities that other apps might not do – some might run a full stock system, one may let you do all of your sales – that type of thing. Some will be global, some not. Some will work with multi-currency, some not.
The beauty is that business owners, staff and accountants can look at the data on accountancy software to keep up to speed.
Where to go for help
Most small businesses already have accountants so they’re a good first port of call.
Get the person you’re speaking with to go on a bit of a fact-finding mission with you as a business owner. They need to fully grasp exactly what your business is doing.
You just need to be clear in your mind what your processes are at the moment, what the bottlenecks are within the business and what problems you’re trying to solve. Ask questions about how long the process would take, what the cost implications are and how you go about training your team once the software is in place.
Some of these projects can be quite in-depth and there are several stages to them. It just depends on the business.
Ideally, business owners would want to be talking to people who are specialists in their own areas. If you’re in the manufacturing industry and you’re going to use a particular cloud application, then you would want to work with someone who has used something similar before. It’s all about collaboration.
With technology, a lot of the process can be done remotely. A software developer, for example, is often not UK-based. You’ll have people sitting in Australia and the UK on the same meeting. It’s not an issue in the days of technology!
If you don’t have an accountant, the accountancy software your business is using already is another good starting point. Visit the company’s website – what manufacturing apps does your software integrate with? There’ll be a page somewhere on their website.
Not everybody is on cloud accountancy software though. If that’s the case, search online and download free demos of software to try out for a couple of weeks. Look out for specialists in your sector and specialists in the UK who can help you get these things implemented.
How the right software could benefit your business
The fact that it’s all in the cloud means that it’s easy to deal with suppliers, your in-house team and your products.
You’ll know where the stock is and how much there is; it just streamlines the whole process which leads to efficiency, helping you to make better and timely decisions. Efficiency then means business owners can be focused on growing the business.
Having said all of this, you still need people in the business who are administering and using all of this data and dealing with it on a daily basis. Then you have your external advisers that specialise in whatever you cannot do in-house.
Within this team, you need to work closely with somebody or have somebody in-house who can drill into your data and create forecasts of ‘what if’ scenarios – like ‘what if, after Brexit, we lose 20 per cent of our current market?’.
Your growing company
Every business needs basic compliance: payrolls, VAT, things like that. But as they grow, they’ll need more financial procedure advice.
“Any businesses that want to expand need to know their numbers”
Any businesses that want to expand need to know their numbers. Particular attention needs to be paid to cash flow.
This is particularly important if you want to seek investment or, depending on what you do, apply for a research and development grant.