What is Factory Accounting and How to Manage Factory Accounts

Factory Overheads & Accounts: A Guide for Manufacturers to Save Costs

Running a factory is not only about making products. It is also about managing money carefully.

Factory accounting is the way a factory keeps track of all the money that goes in and out, from raw materials to staff wages and overhead costs.

Good accounting makes sure the business stays profitable, and cash flow is under control.

Every factory has overheads costs that are not directly linked to one single product but are needed to keep the factory running.

These include:

Managing factory overheads is key because if they are not controlled, profits can quickly shrink.

By recording and checking overheads regularly, factory leaders can spot waste and make smarter financial decisions.

Record All Costs Clearly
Keep track of raw materials, labour, and overheads. Use accounting software or spreadsheets to separate each cost.
Use Cost Categories
Split costs into direct costs (materials, labour) and indirect costs (overheads). This makes it easier to see where money is going.
Set a Production Budget
Plan ahead. A good budget helps you predict costs and compare them with real spending.
Monitor Overheads Monthly
Regular checks mean you can act fast if costs start rising. For example, energy bills or machine breakdowns can affect profits.
Analyse Variances
Compare planned costs with actual costs. If there are big differences, find out why. This is called variance analysis.
Work with an Accountant
A professional accountant who understands manufacturing can help you manage factory accounts, spot where the money is lost, and improve profitability.

Factory accounting is a tool to grow the business and keep it financially healthy.

What is the difference between factory accounting and normal accounting?
Factory accounting laser focuses on production costs and factory overheads. Factory Accountant manages and maintains how much it costs to produce 1 unit, captures fluctuations, price spikes, updates costing, manages manufacturing efficiencies. Normal accounting covers final received, paid, accrued business finances.
Why are factory overheads important?
Because they affect the total cost of making products. If not managed, they reduce profit margins.
Can small factories use factory accounting?
Yes. Even small workshops benefit from tracking costs and overheads properly.
Do I need special software for factory accounts?
Not always. Spreadsheets can work, but accounting software saves time and reduces mistakes. Integration into company financial systems makes it much more easier and insightful.
Should I hire an accountant for my factory?
Yes, if you want expert help managing costs, budgets, and financial reports.