The Manufacturer Who Took Back Control of His Numbers

A Metro Detroit electrical-parts manufacturer was dealing with unreliable monthly financial reporting. Management could not trust the numbers behind pricing, purchasing and operating decisions, and the reported profit swung in ways the operation did not justify.

The company's financial statements were moving for reasons nobody on the plant side could see. An entry in the accounting system was effectively counting the same labor cost twice, creating almost $250,000 in false cost swings in reported results.

Because the underlying reporting was wrong, every decision built on it, from product pricing to purchasing, was being made on distorted information.

Pagac identified the double-counted labor entry by rebuilding the accounting from the source data rather than accepting the output of the system.

The corrected picture showed that the real problem was not in the accounting system alone. Rising copper costs were affecting profitability on two strong-selling products, and the distorted reports had been hiding the trend.

Pagac rebuilt the previous twelve months of reports on a corrected basis and recalculated the company's break-even point, so the owner finally had a number he could plan against.

The corrected monthly reporting structure was put in place so the same double counting could not re-enter the books, giving the company reporting it could rely on going forward.

With accurate reporting, the manufacturer could see exactly how rising copper costs were eroding profitability on two strong-selling products and could better understand the pricing adjustment needed.

The engagement did not end with a diagnosis; it ended with a reporting foundation the owner could make decisions on, and a pricing question he could finally answer.