Accountants for Manufacturing Businesses

A manufacturer rarely sells what it made this week. It buys steel, resin, flour or timber months ahead, pays wages while the product is on the floor, and invoices when it ships. Between those points sits a large amount of money that does not appear on a profit and loss until the sale is recorded. An owner who reads the bank balance as profit will make the wrong call on pricing, hiring and the next machine.

The core discipline is job costing with overhead absorption done honestly. Direct materials and direct labour are easy to attribute. The harder question is how much of the rent, power, supervision, maintenance and depreciation each job or product line should carry. Get the absorption rate wrong and the quoting team is winning work that loses money, or losing work that would have paid. We set up costing in Xero with the manufacturing or inventory add-on that suits the business, and we review the overhead rate at least twice a year, because it drifts as volume changes.

We work with fabricators, food producers, joinery and cabinet workshops, component makers and packaging businesses across the industrial areas from Capalaba to Logan. The product varies. The accounting questions do not.

Stock is where manufacturing profit hides, and where it leaks. Raw materials, work in progress and finished goods all have to be valued at year end, and the method chosen affects taxable income. The ATO accepts cost, market selling value or replacement value for each item, and the choice can be made item by item. That flexibility is useful, but only if the stock records are good enough to support it.

Work in progress is the part most owners undercount. A half-built trailer or a batch mid-process has absorbed materials and labour that should sit on the balance sheet, not in this month's expenses. Miss it and the profit swings wildly between months, which makes management reporting useless and lending conversations harder than they need to be.

We help put a stocktake process in place that the team will actually follow, reconcile the physical count to the system, and write off obsolete or damaged stock in the right period so the deduction is not lost.

• Closing stock valuation method chosen item by item
• Work in progress recognised at month end, not only at year end
• Obsolete and slow-moving stock reviewed before 30 June
• Bill of materials and standard costs reconciled to actual
• Inventory add-ons connected to Xero so the books match the floor

Manufacturing is capital hungry. A CNC router, a blast chiller, a press brake or a packaging line can cost more than a year's profit, and how it is financed and depreciated changes the tax outcome for years.

The instant asset write-off lets eligible small businesses deduct the full cost of an asset in the year it is first used or installed ready for use, up to the current threshold. The threshold and the turnover test have moved several times, so we confirm the rules that apply before the purchase order is signed, not after. Above the threshold, assets go into the small business pool or are depreciated at effective life rates, and the date of installation decides which year gets the deduction.

Chattel mortgage, hire purchase, finance lease and operating lease each treat GST, interest and depreciation differently. We model the options before the finance broker does, so the cash flow and the tax position line up with what the business can carry. Equipment held in a separate entity and leased to the trading company is common in family manufacturing groups and can protect the plant if the trading business is ever sued.

Electricity, gas, freight and raw materials have risen faster than most manufacturers' price lists. The businesses that stay profitable track input costs by product and reprice on a schedule, rather than discovering a margin problem at year end.

We build margin reports that show contribution by product line after direct costs, so the owner can see which lines are carrying the factory and which are quietly subsidised. Energy deserves its own line in the overhead model, because a line that runs ovens or compressors all day absorbs far more of the power bill than one that does not, and a single blended rate hides that.

Where a business exports, we handle the GST-free treatment of export sales, foreign currency receipts and the documentation the ATO expects to support the GST-free claim. Export and market development programs exist at state and federal level, and they change, so we check what is open at the time rather than quoting a scheme that has closed.

Once a manufacturer has twenty or thirty people on the floor, payroll becomes the biggest compliance exposure in the business. Queensland payroll tax applies when total Australian wages pass the current threshold, and the Queensland Revenue Office groups related entities together when it tests that threshold. Many family groups cross it without realising because two companies share directors and staff.

Manufacturing awards carry shift loadings, overtime, allowances and classification levels that are easy to get wrong. Single Touch Payroll reports every pay run to the ATO, so an error is visible immediately. Super guarantee has to be paid on time to be deductible, and the penalties for late payment are harsh.

Government support for manufacturers, from apprentice incentives to regional and advanced manufacturing grants, changes with every budget. We do not promise a grant. We check what is currently open, assess eligibility honestly and help prepare the financial information the application needs.

• Queensland payroll tax registration, grouping and annual reconciliation
• Award interpretation, allowances and shift loadings under the relevant modern award
• Single Touch Payroll and super guarantee on time, every cycle
• Apprentice and trainee incentives checked against current programs
• Workers compensation wage declarations that match the payroll

The cash conversion cycle is the number of days between paying for materials and collecting from the customer. For many manufacturers it runs past ninety days. Stock sits for weeks, production takes weeks, and the customer pays on sixty-day terms. The business is funding all of that from its own working capital or an overdraft, and the BAS falls due in the middle of it.

We measure the cycle, then work on each part of it: supplier terms, batch sizes, finished goods levels, deposits and progress billing on large orders, and debtor follow-up. Shortening the cycle by two weeks often releases more cash than a year of cost cutting. The cash flow forecast then shows what growth will cost in working capital before the order is accepted.

Tax timing sits inside the same cycle. GST is payable on invoices raised, not cash collected, for businesses above the cash accounting limit, so a strong sales quarter can produce a BAS that lands before the customers have paid. We set the GST accounting basis and the PAYG instalment approach to suit the business, and we build the tax set-asides into the weekly cash plan so the ATO is never the lender of last resort.

Our virtual CFO service suits manufacturers who have grown past what a bookkeeper and an annual tax return can support: monthly management reports, a forecast that is actually used, and a second opinion on the big spending decisions.

A large share of Queensland manufacturers are family businesses in their second or third generation, with the founder's name still on the sign and the founder's children running the floor. The transfer of ownership is usually the largest financial event in the family's life, and it is often left until something forces the issue.

Succession in a manufacturing business has particular wrinkles. The plant and the premises are often held separately from the trading entity. The business may be worth more than the family expects because of its equipment and customer base, or less because it depends on one person's relationships. The small business CGT concessions can remove most of the tax on a transfer or sale if the structure qualifies, and that eligibility needs to be checked years in advance rather than at settlement.

We help families decide whether the next generation buys in, inherits, or whether the business is sold to management or an outside buyer. Greg Blackaby's background in acquisitions means those conversations include what a buyer would actually pay, not just what the family hopes.