Executive Summary
Axcell, Egypt’s distinguished financial consulting firm, specializes in crafting bespoke solutions to navigate the unique challenges that businesses across sectors face. This case study demonstrates Axcell’s instrumental role in redefining the costing and pricing strategies for an Egyptian apparel manufacturing company serving big brands in the textile industry. The company, despite its reputable clientele, was grappling with an inefficient costing system and inaccurate pricing, which significantly eroded its profitability. Axcell’s intervention involved implementing a robust costing model, transitioning the company to a more efficient accounting software – Zoho Books, and recruiting a competent chief accountant, leading to increased profitability and business resilience.
Client Challenge
Our client, a prominent apparel manufacturer in the textile industry, was operating in a challenging environment characterized by pricing inaccuracy and a faulty costing system. These shortcomings resulted in a profitability level that lagged significantly behind its industry peers. The company urgently needed a comprehensive review and overhaul of its costing and pricing mechanisms to regain its competitive edge and profitability.
The Axcell Approach
Understanding the challenges at hand, Axcell executed a multifaceted approach to enhance the client’s costing and pricing strategies. We worked closely with the production team to redefine the costing system, identifying true variable and full costs based on a thorough analysis of capacity and output volume, including seasonality considerations. This comprehensive review gave the company a clear understanding of its position and the pricing models it could leverage.
Next, we facilitated the transition to Zoho Books, a dynamic software solution known for its customization capabilities. We tailored the production and inventory modules to accurately account for the production cycle and ensure correct cost information flow.
To fortify the company’s financial management, we recruited a chief accountant who managed transactions efficiently and provided management with reliable financial reports.
The Outcome
Axcell’s strategic intervention led to a transformative shift in the client’s costing and pricing strategies. With a revised costing system and efficient accounting software in place, the company experienced significant improvements in its pricing accuracy. Consequently, they were able to secure a profit margin exceeding 55% per piece, with overhead costs contained within 15%.
In terms of overall financial performance, the company saw its net profit margin (after taxes and interest) surge to between 25-35%, a substantial increase from the 8-12% it had recorded in previous years. This remarkable turnaround underscored the importance of understanding one’s financials and the ability to quickly adapt to market changes to ensure business sustainability.
Conclusion
Axcell’s expert financial consulting services once again proved transformative, this time for a key player in the textile industry. Our interventions, ranging from overhauling costing and pricing strategies to implementing effective software solutions and competent human resources, enabled our client to dramatically enhance profitability and resilience. This case study demonstrates Axcell’s dedication to creating tailored solutions to navigate financial challenges, drive growth, and promote sustained success.
