The Real Financial Impact
When a machine stops, profit stops.
It’s that simple.
In manufacturing, every minute of downtime eats into your margins. And many businesses still don’t know how much those stoppages really cost them.
You might track hours lost, but do you know the real financial impact?
This is where calculating the cost of machine downtime becomes essential.
Accountants For Manufacturing & Engineering Business Owners
What Is Machine Downtime?
Machine downtime is any period when equipment isn’t producing as planned.
That could mean a breakdown, maintenance, changeover, lack of materials, or even waiting for quality checks.
Downtime doesn’t just stop production, it affects delivery schedules, labour efficiency, and customer confidence.
Knowing its cost helps you make smarter decisions about maintenance, staffing, and investment.
Why Downtime Cost Matters
Manufacturers often underestimate downtime because it feels like “part of the process.”
But when you add it up over a week or month, the loss is staggering.
For example, imagine one key machine worth £200,000 sits idle for three hours a week.
If that machine normally generates £400 of value per hour, you’re losing £1,200 every week over £60,000 a year.
And that’s before factoring in overtime, scrap, or missed orders.
Calculating the cost turns vague frustration into solid data you can act on.
Manufacturing Efficiency Audit – Skynet Accounting – Accountants For Manufacturing & Engineering
Step 1: Identify the Real Downtime
Start by collecting accurate data.
Guesswork won’t help you make strong decisions.
Record:
- When and why each machine stopped
- How long it remained idle
- What caused the delay (breakdown, setup, materials, operator)
Modern machines often have sensors or logs that make this easy. If not, a simple downtime sheet can still reveal patterns.
Step 2: Measure Lost Production
Next, calculate what you would have produced if the machine kept running.
Formula:
Lost Output = Downtime Hours × Standard Output per Hour
For example, if your machine produces 50 units an hour and you lose two hours, that’s 100 units missed.
Those lost units represent sales you can’t recover, even if you run extra shifts later.
Step 3: Put a Value on Each Lost Unit
Now assign a value to those lost units.
You can use either:
- Selling price per unit, or
- Gross margin per unit if you want a more accurate profit figure.
Example:
If your average selling price is £20 and you missed 100 units, that’s £2,000 in lost sales.
If your gross margin is 35%, then the profit loss is £700.
This shows the direct hit to your bottom line.
Step 4: Add Labour and Overhead Costs
Machines don’t stop alone, people do too.
If operators are waiting during downtime, their wages still count. Add those labour costs to the total.
Also include overheads like:
- Power consumption while idle
- Maintenance team response time
- Cost of replacement parts
- Unused materials or scrap generated
These often push the true cost far beyond the lost production value.
Step 5: Include Secondary Effects
This is where most manufacturers miss the full picture.
Downtime causes knock-on effects such as:
- Overtime to meet deadlines
- Late delivery penalties
- Lost customer trust
- Reduced output from other dependent processes
These are harder to quantify but still real.
Estimate them based on past incidents or discuss them with your team to get realistic numbers.
Step 6: Calculate the Total Downtime Cost
Combine everything into a single figure.
Total Downtime Cost = (Lost Production Value + Labour + Overheads + Secondary Effects)
Example:
- Lost production value: £700
- Idle labour cost: £150
- Maintenance and overheads: £80
- Late delivery penalty: £70
Total = £1,000 per event
If this happens twice a week, you’re losing over £100,000 a year enough to fund new equipment or hire skilled staff.
Step 7: Analyse and Act
Once you know the true cost, you can take action.
Look for recurring causes and tackle them systematically.
For example:
- If setups take too long, streamline changeovers.
- If breakdowns are frequent, review your maintenance schedule.
- If you lack spares, improve stock management.
Turning data into decisions is how manufacturers improve profitability without raising prices.
Example For Illustration Purposes: Electronics Manufacturer
An electronics assembly business ran two SMT machines producing 8,000 boards a week. Each time one stopped for maintenance or misfeeds, operators waited around.
After tracking downtime for a month, they discovered 25 hours of lost production.
Each hour cost £350 in value. Total monthly loss: £8,750.
By introducing preventive maintenance and better operator training, they cut downtime by 60%.
Annual saving: over £60,000.
Small changes, big results.
How to Reduce Downtime Costs
- Invest in predictive maintenance: Use sensors or alerts to catch issues early.
- Train operators well: Skilled teams identify and fix problems faster.
- Improve scheduling: Plan maintenance when demand is lower.
- Use data: Track downtime by machine, operator, or cause to find trends.
- Collaborate across departments: Maintenance, production, and finance should all understand the numbers.
Every improvement protects your profit margin.
5 Common Mistakes When Calculating Downtime Cost
- Using sales value instead of profit – Always calculate using gross margin for realistic results.
- Ignoring labour cost – Operators’ time counts even if they are waiting.
- Not recording causes – Without root causes, you can’t fix anything.
- Overlooking indirect losses – Missed deliveries or quality issues cost more than you think.
- No follow-up action – Data means nothing unless it drives change.
FAQs
- How often should downtime be tracked?
Ideally daily. Consistent data gives the best insight into trends and recurring problems. - What’s the difference between planned and unplanned downtime?
Planned downtime is scheduled for maintenance or changeovers. Unplanned downtime is unexpected and usually more costly. - Should I include setup time in downtime calculations?
Yes, if it reduces available production hours. It’s still lost capacity. - Can small manufacturers benefit from tracking downtime?
Absolutely. Even one hour of lost output per week can add up to thousands over a year. - What’s the best tool to track downtime?
Simple spreadsheets can work, but digital factory systems or ERP software provide accurate, real-time data.
Final Thoughts
Downtime is invisible profit loss.
When you start tracking and calculating it properly, you see where your money is leaking.
Once you know the true cost, every improvement becomes easier to justify whether that’s better training, new equipment, or smarter scheduling.
Call to Action
If you’re a manufacturer who wants to uncover the real financial impact of downtime and improve production efficiency, we can help.
At Skynet Accounting, we specialise in financial management for manufacturing and engineering firms.
We’ll help you connect the shop floor data with your financial results so you can make better, faster decisions.
Click on the link below and apply for a call:
Apply For a Call – Skynet Accounting – Accountants For Manufacturing & Engineering
Written by Yesim Tilley Founder of Skynet Accounting
Follow me on LinkedIn: www.linkedin.com/in/skynet-yesim-tilley
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