Manufacturing finance needs the cost of each product, what sits in work in progress, why actual cost differed from standard, and what the plant is worth. Naarvin costs production orders from bills of materials and the hours on each operation, drafts the monthly work-in-progress journal for review, values stock and runs counts with a second approver, and keeps the fixed asset register, including assets still under construction. People approve every journal.
What makes finance in manufacturing different?
- Product cost depends on materials, labour and overhead, and the ERP often holds only part of it.
- Work in progress at month end is estimated, not calculated.
- Actual cost differs from standard, and nobody can say whether it was price, usage or conversion.
- The plant and machinery are the largest assets, with projects under construction for years.
- Stock counts and write-downs are done once a year, under pressure.
How does a manufacturer run finance with Naarvin?
- Set up bills and routingsEach finished item has a bill of materials, with components, quantities and cost lines, and optionally a routing of operations at work centres with approved rates.
- Cost production ordersComponents are issued into work in progress at their cost on the day, by FIFO, average or standard. Labour and overhead are absorbed from the hours entered on each operation.
- Complete and explain variancesCompletion moves the cost to the finished item. Where you value at standard, the difference is a production variance, split into usage and conversion.
- Draft the month-end journalThe work-in-progress journal for the month is drafted into ERP postings for review. Nothing is posted until it is approved.
- Keep stock honestStock is valued with ageing and slow movers, write-downs are proposed from your policy, and counts are approved by someone who did not count.
- Look after the assetsThe fixed asset register runs depreciation, physical counts and assets under construction, and capital projects sit in the plan with their approvals.
Which production variances does Naarvin show?
| Variance | Question it answers | How it is measured |
|---|---|---|
| Usage | Did we use more material than the bill allows? | Components issued against the bill for the quantity completed, at standard |
| Conversion | Did labour and overhead cost more than planned? | Absorbed and entered costs against the bill's cost lines |
| Scrap | What did a scrapped batch cost? | Everything gathered on an order that completed nothing |
What do you need to start?
- Your accounting system connected, and stock movements or snapshots.
- Bills of materials and, if you use them, routings with work-centre rates.
- Your costing method: actual or standard.
- Your fixed asset register, or the ledger balances to build it from.
Who is this for?
Manufacturers and processors that want product cost and work in progress calculated each month, not estimated once a year. A business that assembles a few products to order may find its ERP's costing enough.
Questions people ask
Does Naarvin replace our ERP's manufacturing module?
No. Production is planned and run in your ERP or plant system. Naarvin calculates the cost, the work in progress and the variances, and drafts the journals for approval.
Can we value at standard cost?
Yes. Value at actual or at standard. At standard, the difference on each order is shown as a production variance.
Does it handle assets under construction?
Yes. The fixed asset register keeps assets under construction until they are brought into use, then depreciates them.
Are journals posted automatically?
No. The work-in-progress journal is drafted for review and goes to your ERP only after approval, once your admin turns sending on.