Practical Advice to Increase Manufacturing Profitability

Learn how manufacturing accountants can fuel business improvements for greater profitability.

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For many years, this column has urged accountants and finance professionals to step up their game as business partners to all parts of the organization. With small and mid-size manufacturers, there is a tremendous need for accountants to move beyond financial reporting and budgeting for control to help every area of the business understand and improve the monetary impact of operations on profitability—whether it is in manufacturing, warehousing, marketing/sales, or personnel. The function most often missing from the accounting repertoire is creating information for internal decision support. Why? First, because it is barely taught in accounting curricula; and second, because most accountants start out in auditing and auditors don’t care about internal decision support, only external financial reporting.

I’m thrilled to announce that a book titled, “Profitable Expectations: An Accoutant Rising to the Challenge” has been published that tells the story of a traditionally trained accountant working as a controller for a manufacturing company who moves through a process of enlightenment (yes, that means guided by a spirit) to become an effective business partner. The story is fictional, it is very engaging, and it includes highly readable explanations of the approaches and thinking used to create actionable internal decision support models and information. Avid readers can explore a link to a spreadsheet that has a functioning model of the new thinking used by the story’s company. “Profitable Expectations” is comparable to Eli Goldratt’s “The Goal,” which illustrated constraint and throughput thinking. “Profitable Expectations” shows the value of modeling operations purely for internal decision support information that reflects operational and economic reality, not financial reporting rules.

Whether your business is large or small, this book has universal application as a guide for accountants to become better business partners and bring the power of internal decision support modeling and monetary insights to bear on improving profitability and the teamwork of your organization.

“‘Profitable Expectations: An Accountant Rising to the Challenge’ is the story of a thirty-something controller with a traditional, financial accounting background who successfully makes the transition from an efficient “bean counter” to an effective “bean grower” and meets the challenge and expectations of her CEO. After a stint in public accounting, Marcella DeCou had been the controller of PlumbCo, a $20 million manufacturer and distributor of plumbing products, for three years when retired Admiral Alex Johnson took over as CEO. His view of a financial executive’s role was quite different from that of her previous boss. Johnson expected his controller to not only be an effective administrator, but a value-adding member of the company’s management team. The story follows DeCou as she works with other members of the company’s management team, as well as with an elderly muse she met through the Institute of Management Accountants, to better understand her company’s business processes, build trusting relationships with her peers, develop valuable leadership skills, use causal modeling to gain a deeper understanding of the economics that underlie PlumbCo’s business, and become a decision leader who plays a major role in guiding her organization into a more profitable and sustainable future.”

One essential message in the book for manufacturing CEOs is that the prime mover behind a controller becoming a value-adding member of a company’s management team was the CEO’s expectation that she become one. If accountants don’t know they are expected to help grow value, they will be content to sit back and do historical reporting. Top management must demand relevant and actionable information that will aid their fellow managers in making innovative and quality business decisions. If top management doesn’t expect more, accountants will remain a costly piece of overhead.

Every manufacturer needs a great financial business partner, not just to do the books and handle financial reporting, but to create effective information that allows all parts of the organization to focus on improving the business for greater profitability. For this, “Profitable Expectations” provides a practical and readable guide.