Manufacturing finance
When a cost sheet has not been checked since the BOM was revised, a price-down is accepted on a figure nobody can defend, and stock statements drift from the audited stock until the bank asks why. We provide factory accounting, costing, inventory and working capital work, decision analysis such as make-or-buy, and MIS and profitability reporting.
Last reviewed 8 October 2026
In a factory, most finance problems arise between the shop floor and the ledger. Material is issued without being booked, and scrap is sold without being traced. Stock at the job worker is forgotten. The cost of a part may be a number that nobody has checked since the BOM was last revised. None of this is visible in a single month; it appears when an OEM asks for a 3% reduction, when drawing power falls short of the audited stock, or when the year's margin is lower than the monthly figures suggested.
The work on this page is done in the way a plant's own finance team would do it. It covers factory accounting, product costing and cost sheets, overhead absorption, and inventory and stock work for banks. Working capital, supply chain cost, make-or-buy and continue-or-exit decisions, and MIS and profitability by product, customer and plant are included as well. The page is written for promoters and finance heads of manufacturing businesses in Satpur, Ambad, Sinnar, Gonde, Dindori and across Nashik, and for groups elsewhere in Maharashtra that we work with from our Nashik office.
Accounting and costing
Factory accounting
The accounting between the shop floor and the ledger covers material issues, work in progress, finished goods, scrap, inter-unit transfers and goods with job workers. Every month, the trial balance should agree with the stores register and the production log.
Product costing and cost sheets
Cost sheets are built for each part from the bill of materials, routing, machine hours and labour. Gaps between standard and actual cost are traced to price, usage, yield or rejection.
Overhead absorption
Absorption rates are set by cost centre and machine hour and tested against normal capacity, so that idle time is not hidden in the cost of good parts.
Personnel cost policy
Pay structures, incentive schemes and reimbursement rules are designed with their cost per unit and their tax treatment set out in writing.
Inventory and working capital
Inventory valuation
Raw material, WIP and finished goods are valued under AS 2 or Ind AS 2, with the income-tax computation shown alongside. Slow-moving stock, scrap and by-products are examined closely.
Physical verification and stock audits
Physical counts are planned, observed and reconciled with the books. Banks appoint stock auditors for their borrowers, usually from their own panels; for borrowers, we help prepare for a stock audit.
Stock statements for banks
Monthly or quarterly stock and debtors statements are prepared from the books in the bank's format, so that they agree with the audited accounts later.
Working capital and the cash cycle
Days of cash held in stock and customer credit, less the days suppliers fund, are measured, and the days that can be removed are identified.
Supply chain cost review
Freight, packing, handling, vendor terms and stock held across the chain are costed to show where money is spent between the supplier and the customer.
Decisions and reporting
Make-or-buy analysis
The full cost of making a component in-house is compared with a supplier's price, including capacity, quality and the overheads that would remain.
Buy-or-hire analysis
Purchase, lease and hire of machinery or vehicles are compared on cash flow, tax and utilisation over the period of use.
Continue-or-exit analysis
A loss-making product, customer or unit is examined for its contribution and for the costs that would remain after exit, before a decision is taken.
Profitability by product, customer and plant
Contribution and margin are reported on one agreed method, so that plants and customers can be compared.
MIS and database set-up
A monthly pack of sales, margin, cash, receivables and stock is built from your books, with the production and costing data kept in a structured database rather than scattered spreadsheets.
For manufacturers
An OEM asks for a price-down
Suppose a supplier in Satpur or Ambad is asked for a 3% reduction. The real cost of that part must be known first. We rebuild the cost sheet from the current BOM, cycle time and rejection rate, so that the price discussion starts from a figure you can defend.
Consumption has drifted from the BOM
Steel, castings or resin consumed per unit sometimes rises above the BOM without any known reason. In that case we reconcile issues, production, scrap and returns by item and by month. The cause is usually one of four: yield, rejection, theft or a BOM that is out of date.
Stock is sitting at the job worker
Material sent for machining, plating or heat treatment remains your stock. We check that it is counted, valued and reported to the bank. The GST job-work records must also agree with the inventory records.
The bank's drawing power does not match the audited stock
If the stock statements and the audited balance sheet show different figures, the bank asks for an explanation. We locate the point where the two diverge. A monthly routine is then introduced so that the difference does not recur at the next renewal.
One group, several plants, one set of numbers
Groups with units in Sinnar, Gonde and Dindori often cannot compare plant margins, since each unit calculates cost in its own way. One method is agreed across the group, and plant profitability is reported on that method.
How an engagement runs
Walk the plant
The first visit is to the shop floor and stores. How material moves there shows where the numbers are likely to fail.
Agree the question
The first scope is narrow: one costing question, one inventory problem or one MIS pack. A usable answer is then available within weeks.
Build from your books
Every figure is traced to your ledger, stock registers and production reports. Your own team can therefore maintain the work after our involvement ends.
Hand over a routine
Your accounts team receives a monthly routine to own. A review point for us can be included if you want one.
What we need from you
A first costing or inventory engagement usually requires the following. If anything else is needed, we will say so early.
- Audited financial statements for the last two years and the latest trial balance
- Stock registers, stores ledgers and the last physical verification sheets
- Bills of materials, routings and standard costs, if you have them
- Production and rejection reports for a recent period of three to six months
- Job-work challans and the job-work stock position
- Stock and debtors statements filed with your bank, and the sanction letter
- A list of products, customers and plants you want profitability reported on
- Cost records and the cost audit report, if your company is required to keep them
Cost records and cost audit
Section 148 of the Companies Act, 2013 allows the Central Government to require companies in specified industries to keep cost records. The Companies (Cost Records and Audit) Rules, 2014 contain the details. They set the industries and the turnover tests for keeping records and for having them audited.
Maintaining cost records is the company's own duty. We can help you design and keep them, and align them with your financial accounts.
Cost audit is a separate matter. The law assigns it to a cost accountant in practice, and we do not conduct cost audits. Where you need one, we work alongside your cost auditor, so that the cost records, the financial accounts and the reconciliation between them are ready when the audit starts.
Common questions
Is product costing the same as a cost audit?
No. Product costing is management work. It tells you what a part or product costs to make, so that you can price, quote and decide. A cost audit is a statutory audit of cost records under section 148 of the Companies Act, 2013, carried out by a cost accountant in practice. We do the first. The second is outside our work, although we can help you keep the records it examines.
Our bank wants a stock audit. Can you do it?
Banks appoint stock auditors themselves, usually from their own panel. If the bank appoints us, we conduct the audit for the bank. When we act for you as the borrower, we help you prepare by counting, reconciling the stock statement with the books, and clearing old differences before the auditor arrives. We cannot do both for the same borrower and period.
Why does inventory valuation matter for tax as well as for the accounts?
Closing stock moves profit directly, and so it moves tax. The accounting standards and the income-tax rules on inventory are close, although they differ in places, for example on which costs are included. We value inventory for the accounts and show the tax position beside it, so that the difference is explained before any assessment. Income Computation and Disclosure Standard II on inventories continues under section 276(2) of the Income-tax Act, 2025 (section 145(2) of the 1961 Act).
We are a small manufacturer. Is this work only for large groups?
No. A unit with one plant and a single accountant often gains the most. A basic cost sheet and a monthly stock reconciliation change pricing and bank discussions quickly. The work is sized to the business.
How is a make-or-buy decision tested?
The supplier's landed price is compared with the cost of making the part, counting only the costs that would change. Fixed overheads that remain either way are excluded, and spare capacity, quality risk and tooling ownership are considered beside the figures.
See also: Accounting and Compliance, Business advisory, GST and Indirect Tax
Contact the firm
About Manufacturing finance, or any related matter. A phone number or an email address is enough for us to reply.
- Office
- Office at Plot 08, Eden Complex, Gangapur Road, Nashik 422222
- Hours
- 9:30 AM to 8:00 PM; other times by appointment