From Batch to
Balance Sheet

The Structural Disconnect: Operations vs Finance

Most manufacturers operate with two parallel realities — and rarely do they align cleanly.

When these realities are connected only through period-end uploads, manual journals, and spreadsheet reconciliations — finance stops reflecting what actually happened on the factory floor. And in regulated industries, approximate truth is not acceptable.

Why This Matters More in Manufacturing, Pharma, and MedTech

In service businesses, costs are relatively linear. In manufacturing, especially regulated manufacturing, costs are layered, time-based, batch-driven, and highly sensitive to variation.

Pharma and MedTech add further complexity through batch genealogy, yield loss, quality holds, and regulatory release steps. If manufacturing and finance are not tightly integrated, financial statements become estimates — not evidence.

Cost of Goods Sold (COGS): Where Distortion Begins

COGS is one of the most critical metrics in manufacturing. It drives gross margin, pricing strategy, product viability, and investor confidence. Yet in many organisations, COGS is calculated far away from where costs are actually incurred.

WIP Valuation: The Hidden Financial Risk

Work in Progress (WIP) is one of the most misunderstood and misreported areas in manufacturing finance.

WIP should reflect actual material consumed, actual labour applied, actual overhead incurred, and actual production status — at a specific point in time.

In spreadsheet-driven or disconnected environments, WIP becomes a plug number, an estimate, a balancing figure. Production knows what stage a batch is at. Finance guesses what it's worth.

In Pharma and MedTech, incorrect WIP valuation is especially dangerous because batches may be on quality hold, release is not guaranteed, and regulatory approval directly affects value. A batch that cannot be released is not the same asset — yet spreadsheets often treat it as one.

Batch Costing vs Standard Costing: Why Assumptions Break Down

Many manufacturers rely on standard costing. It simplifies accounting, smooths variance, and makes reporting predictable. But predictability is not accuracy.

Standard costing works when processes are stable, variability is low, and volumes are consistent. In regulated manufacturing, this is rarely the case. In Pharma and MedTech, each batch may differ, yields fluctuate, scrap rates vary, and quality interventions change cost.

Batch costing, when connected directly to finance, reveals true unit economics, cost drivers, and process weaknesses. But batch costing only works if manufacturing execution and finance are part of the same system.

The Spreadsheet Problem in Manufacturing Finance

Spreadsheets are often used to "bridge the gap" between manufacturing and finance. They become cost rollups, WIP trackers, and variance explanations. This introduces three major risks:

Spreadsheets do not fail loudly. They fail quietly — by delaying truth.

Real-Time Margin Visibility: Why It Changes Everything

Margin is not a finance metric. It is an operational outcome.

Real-time margin visibility means knowing profitability before month-end, seeing the impact of scrap immediately, and understanding cost changes as they happen.

When manufacturing systems talk to finance, every material issue updates COGS, every labour entry affects margin, and every quality event has financial context. This shifts behaviour: production understands financial impact, finance understands operational reality, and decisions improve across the organisation. Margin stops being a retrospective report and becomes a live signal.

ERP + Finance Convergence: The Structural Solution

The solution is not better spreadsheets. It is ERP and finance convergence.

A converged system means one data model, one source of truth, one timeline. Manufacturing events flow directly into inventory valuation, WIP accounting, COGS calculation, and financial reporting — without translation layers and without manual intervention.

Why Salesforce-Native ERP Changes the Equation

For Manufacturing, Pharma, and MedTech companies, the underlying platform matters. A Salesforce-native ERP platform provides real-time transaction processing, native audit trails, role-based access control, and integrated financial logic.

Because operations and finance live on the same platform, there is no batch sync, no data duplication, and no reconciliation lag. Finance no longer waits for manufacturing to "send the numbers". The numbers already exist.

Compliance and Audit Readiness Improve Automatically

When manufacturing and finance are integrated, WIP valuation is defensible, COGS is traceable to source transactions, batch costs are auditable, and adjustments carry approvals.

Auditors no longer ask, "How did you calculate this?" They ask, "Can you show me?" — and the system answers. This is especially critical in Pharma and MedTech environments regulated by bodies such as the U.S. Food and Drug Administration, where financial and operational records must align precisely.

Financial Truth Starts on the Shop Floor

Manufacturing does not end at the batch. It ends on the balance sheet.

If manufacturing systems and finance systems do not talk — costs drift, margins lie, and risk accumulates. In Manufacturing, Pharma, and MedTech, the winners are not the companies with the most features. They are the companies with the clearest financial truth.

And that truth can only exist when manufacturing and finance are one conversation, not two disconnected systems.