Being a manufacturer, remember one thing- Your business is unique. Why? Retailers sell stock and service, companies sell their time, but only a manufacturing business produces new products from scratch. Thus, managing manufacturing accounting is not a cakewalk.
However, the accounting aspect is considered as an operational activity, but it also requires a lot of strategic thinking to build better relationships with vendors by paying them on time and to run the process efficiently. Use Infinit Accounting services if you are looking for outsourced accounting services for your business.
With this knowledge, let’s drown into the crucial accounting aspect of manufacturing business where they need to stay focused:
- Your inventory-
Many manufacturers hang on inventory management as it is most critical of all to run the business successfully. Aspects like the purchase of raw materials, work in progress, and finished products need to be accurately accounted in the books to maintain the efficiency in the stock.
However, if you fail to do so, it will result in incorrect records and money loses. Ordering too much material or not at all can ultimately bog down the productivity of your manufacturing business. With organized books and accurate records of inventory, you can quickly analyze each part of the process.
- Your receivables and payables-
You cannot run your manufacturing business if you don’t know how much money is coming in and going out. Thus, managing your accounts receivable can help you track your vendor payments and prevent your business from bad debts.
So how you can manage your accounts receivable? Follow these steps:
Design your invoices well
Maintain your customer base
Take regular follow-ups with your clients
Assign a department for collections
Let’s come to accounts payable. Accounts payable is highly significant for manufacturers to build better relationships with their vendors and prevent their business from excessive liabilities.
However, managing invoices is often a cumbersome process for manufacturers as it includes more papers that need to be well-managed, consumes time, and requires accuracy. More so, you cannot wholly stay concentrated towards your invoice management, thus, assigning a new department or outsourcing accounts payable can be an ideal choice!
For keeping track of your accounts payable process, follow these crucial steps:
Don’t procrastinate invoice entries off for the next day
Pay your bills as per due dates to avoid late payments
Always check the time gap between order purchased and the payment data it’s better to choose a long hole for payments
Choose electronic payments rather than signing checks
- Your payroll process-
No business can run without the hard work or efforts of their employees. However, manufacturing businesses include innumerable workers for performing the production task who are crucial for the company. So managing your payroll process should be foolproof. Payroll process is quite complicated in this industry as there are workers based on wages as well as salaries and payroll taxes also play a crucial role.
Thereby, tracking each payroll and preparing paycheck is way too challenging. So what manufacturers can do?
You can make use of payroll software like Wave, Xero, KashFlow, etc.
You can hire an HR team for your business
Or you can keep a register to check the attendance and do all the entries manually
Keep yourself updated with latest payroll legislation
- Your financial reports-
Financial reports play an important in every business organization and manufacturing industry is not excluded from this phenomenon. At the end of every fiscal year, you want to know the financial position of your company in the market to make better budget strategies and cut down expenses.
Financial reporting involves balance sheets, profit and loss statement and cash flow statement with accurate records. With the help of these statements, you get a glimpse of your finances annually or quarterly. You also need to file your taxes. You can consider taking small business tax course for that purpose.
Below mentioned are some benefits of financial reporting:
You can attract more investors towards your business
With the colossal investment, you can diversify the business
You can maintain proper liquidity with your investors
It mainly helps in the decision-making process
- Your taxes-
How can you forget about your taxes? Taxes are the fundamental business survival aspect as it directly or indirectly hit the bottom line performance of manufacturing businesses.
However, being a manufacturer, preparing or filing your taxes would not be your cup of tea, yet, you have to manage it well. Seeking an expert can be an ideal choice as they have the right knowledge and are updated with new tax legislation.
Below I have attempted to give you some tax saving tips that might help you to file your taxes accurately:
If you export items that are at least manufactured 50% in the US, you are qualified for major tax saving through a separate entity called an Interest Charge Domestic International Sales Corporation (IC-DISC).
The Federal Research and Development (R&D) Tax Credit allows companies to enjoy a massive dollar reduction of federal and state income taxes if you qualify certain expenditures allied with the scalability or enhancement of a product, process and software.
InvestOhio is a service agency that helps manufacturers to grow by developing the InvestOhio program that creates 10% nonrefundable income tax credit up to $100 million providing support to investors
The Domestic Production Activity Deduction (DPAD) provides tax relief for domestic manufacturers with the determination of stimulating manufacturing activity.
Last In First Out Inventory Valuation (LIFO) has been around for ages, yet many manufacturers are unaware of its advantages. If you are filing for the first time then go check this link for more detailed info – taxfyle.com/small-business-taxes