Running a factory without tracking per-unit cost is like driving with your eyes closed

Many MSMEs in India start production but face working capital crunch, poor margins, or delayed payments simply because costing and pricing aren’t set right.

In this post, we cover:

• How to calculate your real cost per unit

• Smart pricing strategies for B2B and D2C

• Managing working capital, loans & profitability

• Common financial mistakes MSME manufacturers make

1. Know Your Real Per-Unit Cost — The Foundation of All Pricing

Break your product cost into:

📌 Formula: Total Monthly Cost ÷ Units Produced = Cost per Unit

📌 Don't guess — track inputs daily and calculate every month.

2. Common Pricing Strategies You Can Use

Add GST and logistics clearly when quoting — do not bury costs.

3. Cash Flow: The Lifeline of Manufacturing MSMEs

You may show profit on paper but still struggle if payments are delayed.

Monitor these:

• Receivables Ageing: Who owes you money and since how long?

• Monthly Burn: How much do you spend whether you produce or not?

• Inventory Holding: Deadstock ties up capital

✅ Use simple tools like Google Sheets or apps like Vyapar, myBillBook to track this weekly.

4. Loans, Credit & Working Capital Management

Manufacturing businesses often need capital to buy raw material, upgrade machinery, or scale production.

Explore:

• Working Capital Loans (short-term, lower interest)

• Machinery Loans under CGTMSE (collateral-free)

• Vendor Credit (negotiate 30–60 days credit with suppliers)

• Invoice Discounting (get paid early from third party, after buyer invoice)

📋 Prepare basic financials (balance sheet, ITR, sales history) even if you’re not audited.

5. Common Mistakes to Avoid in MSME Costing & Financials

6. Small Tweaks That Boost Profitability

✅ Bundle SKUs (offer sets to increase average order size) 

✅ Train workers to reduce rework and wastage 

✅ Standardize packaging to avoid delays or cost increases 

✅ Keep close watch on freight and returns

💡 Many small manufacturers miss that logistics and packaging can take up 15–20% of cost if not managed well.

🔍 Real-World Example

Say you’re producing plastic containers.

• Raw material: ₹10

• Labour: ₹2

• Electricity + Machine Depreciation: ₹1.5

• Overhead: ₹2

• Packaging: ₹1.5 Total Cost = ₹17/unit

You quote: ₹22 to a wholesaler (29% margin) But after delayed payments, GST, transport and returns — your real margin = ~5–7%

▶️ This is why cost tracking must include hidden expenses.

🧮 Tools You Can Start With

• Vyapar, myBillBook, Zoho Books (for small manufacturers)

• Tally Prime (if you have in-house accountant)

• Google Sheets + WhatsApp reminders (for beginners)

🧾 Add simple dashboards for:

• Daily production cost

• Receivables >30 days

• Price vs Cost tracker

Let’s Talk

• How are you currently calculating your unit costs or pricing your products?

• What’s been your biggest struggle with money management in manufacturing?

Share your thoughts in the comments or start a thread at Manthan.