Manufacturing Finance: KPIs, OEE and Gross Margin
This guide is for owners and CEOs of manufacturing companies who want to know which numbers drive margin, cash and return on equity. It lays out the operating metrics from purchasing to delivery and connects them to the financial results lenders and investors look at.
What's in the guide
- Operational metrics across five stages: procure, produce, run, stock and deliver
- Six levers for improving gross margin: energy, volume and price, nearshoring, quality, workforce and packaging
- OEE (availability × performance × quality) with world-class component targets
- DuPont analysis: net margin × asset turnover × equity multiplier = return on equity
- The cash conversion cycle (DSO + DIO − DPO) and how to read the balance sheet for liquidity
- Debt and equity KPIs, the capital stack, net debt to EBITDA rules of thumb and a DSCR floor of 1.25×
- A Section 179 example showing the year-one tax effect of buying $1M of equipment
- Inventory management software from QuickBooks Enterprise and Katana up to NetSuite, Epicor and Infor
- Which improvement method fits which goal: Six Sigma, Lean, Kaizen, Kanban, Just-in-Time and others
Questions this guide answers
What is world-class OEE?
OEE equals availability × performance × quality. The guide's world-class components are 90% availability, 95% performance and 99.9% quality.
How do manufacturers improve gross margin?
The guide groups the work into six levers: energy and utility cost, volume and price, nearshoring to cut freight and lead time, quality to reduce rework, workforce skills, and packaging that uses less material.
How much tax does Section 179 save on equipment?
In the guide's example, deducting $1M of equipment in year one under Section 179 saves about $210K at a 21% federal rate. Seven-year MACRS alone deducts about $143K in year one, saving about $30K. Confirm current limits with a tax advisor.
What is DuPont analysis?
It breaks return on equity into three parts: net margin (profitability), asset turnover (efficiency) and the equity multiplier (how much of the asset base is funded by debt). It shows which one is actually driving your ROE.
What is the cash conversion cycle in manufacturing?
It is days sales outstanding plus days inventory outstanding minus days payable outstanding. It measures how long cash is tied up from the time you pay for materials until the customer pays you.
How Strativ helps
Strativ sets up manufacturing finance systems, including integrations between tools like Katana and QuickBooks, so margin and cash metrics come out of the books instead of spreadsheets. Mark also helped create and taught the Finance & Accounting Technology (FATE) Certificate, and Strativ reviews R&D tax credits and other non-dilutive options that can apply to manufacturers.
Request the full guide to get the complete one-page reference, or book a call to talk through your numbers with Mark.
