Industrial machinery · Manufacturing
Know what each machine earned once it was commissioned, not when it left the shop
A machinery builder can sign a profitable order and deliver a loss-making machine, because the cost keeps arriving after dispatch. We cost each machine as a project, from the first design hour to the last commissioning visit. The next quotation then starts from what the last one actually cost.
In one paragraph
Special-purpose machine builders, machine-tool makers and textile, food-processing and packaging-machinery firms build to order. Most turn over ₹20–300 crore and carry an order book of engineered-to-order machines. Each machine takes months to design, build and commission, so its true cost is only known long after the price was fixed. The managing director or promoter usually leads the work, often with the head of projects.
Managing director or promoter, often with the head of projects
The economics
How the money moves in this trade
A machinery order is priced once, at the quotation stage, and then built over three to twelve months. Design and engineering hours, bought-out components, fabrication, assembly, trials, dispatch, installation and commissioning all land at different times, in different cost centres. Most of that cost is real but unallocated. The books show a healthy gross margin on dispatch and a quiet overspend in engineering, service and warranty lines that no machine owns.
Cash follows a different rhythm again. There is an advance on order, a payment against dispatch and a final tranche after installation or performance acceptance. A bank guarantee often stands in for the advance. When commissioning drags or a customer disputes acceptance, the last and most profitable portion of the price sits unpaid. Meanwhile the next order is already consuming working capital.
The problem
Where the numbers usually break down
Engineering hours are an overhead
Design, drawing and programming time is charged to a department rather than to the machine, so heavily customised orders look as profitable as repeat builds.
Changes are built but not priced
Customers request specification changes during the build. They are absorbed on the shop floor and rarely become a priced variation to the order.
Commissioning cost arrives after the sale
Engineers' travel, site time and rework after dispatch are booked as service expense, so the machine's margin is reported before its cost is complete.
Advances fund the wrong machine
Customer advances are pooled with general cash, so an order that is behind schedule can be quietly financed by the next customer's deposit.
Warranty has no history behind it
Warranty claims and free replacement parts are expensed as they arise, with no provision built from the actual record by machine type.
What we do
The work, and the result each part produces
Machine-wise project costing
A cost sheet per order number covering bill of materials, bought-out items, fabrication, assembly hours, engineering hours and trials, compared with the quotation estimate.
Every machine shows its margin against the price it was sold at.
Engineering time booked to orders
A simple time-booking routine for design, drawing and controls staff, with an hourly cost built from their actual salary and overhead.
Customisation is priced from evidence rather than guessed.
Variation and change-order register
Every customer-requested change logged with its cost and a priced variation raised before the work is done.
Scope added during the build is paid for.
Milestone billing against progress
Billing, advances, bank guarantees and retention tracked by order against the build and commissioning schedule.
The final payment is chased the day acceptance is signed.
Warranty and after-sales costing
Warranty claims, free parts and service visits recorded by machine type and installation, and a provision built from that record.
Warranty cost is visible before it erodes the next year.
Spares and service profitability
Spare parts and annual service contracts reported as a separate line with their own margin.
The installed base is managed as a revenue stream, not a cost.
Where we start
The first steps of an engagement
Order files and cost ledgers
We ask for the quotation and cost estimate for recent orders, the bill of materials, purchase and stores records, any engineering time records, and the service and warranty ledgers.
Rebuild one completed machine's cost
We take a recently commissioned machine and assemble every cost it caused, including engineering, after-dispatch visits and warranty, against its quotation.
Order numbers on every cost
Purchases, engineering time and service visits start carrying the order number, and a change-order register opens for variations requested during the build.
A machine-wise margin report
The first report shows quoted against actual cost for the machines reviewed, with any overspend traced to engineering, variations, commissioning or warranty.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Quoted versus actual cost, by machine
- Engineering hours per order, against estimate
- Variations raised and recovered
- Billing and collection against milestones
- Warranty cost by machine type
- Spares and service margin
Who it suits
Written for, and not the right fit for
- You build a standard catalogue product in volume — a product-costing approach suits that better than project costing.
- You need machine safety certification for an export market — that sits with your engineers and accredited test or certification bodies.
- Special-purpose machine, machine-tool and process-machinery builders working to customer specifications.
- Firms whose order sizes have grown faster than their costing and project controls.
- Builders preparing for a bank limit review, an export push or a new product range.
Cities where this trade concentrates
Services
Services this work draws on
Costing and profitability
What each product, line and customer really contributes.
Explore service ↗MIS and financial planning
Reporting built around the questions you actually need answered.
Explore service ↗Outsourced accounting
Your books kept current and reconciled, closed to a published calendar.
Explore service ↗Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
How do we capture design hours without timesheets?
Usually a weekly allocation of hours by order is enough, and most design teams already know which machine they spent the week on. The aim is a reasonable split, not minute-by-minute tracking.
When should revenue on a machine be recognised?
It depends on the contract — when control passes, and whether installation is a separate obligation. We set out the position for your contracts and agree it with your statutory auditor, who forms the final view.
How should repeat machines be priced?
From the actual cost of the machines already built. Once a few have been costed in full, the figures for each module or option become the basis for the next quotation, rather than the original estimate.
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