Raw Material Annual Spending – Is it Relevant for Your Budget?
Summary
When budgeting, most calculate gross margin by just subtracting the cost of goods sold from the selling price, ignoring the impact on inventory and raw material spending as it only affects the Balance Sheet. With shifting customer demands, supply chains, and commodity prices, finance teams need a way to analyze cash flow through the lens of raw material and inventory requirements. Using Where Used logic, most ERP systems can convert annual budgeted volumes by finished good SKU into raw material requirements. To compete, finance teams need tools to create a connected process that starts with volume and mix requirements and ends with a calculated P&L and B/S to drive meaningful decisions. Easy-to-follow model logic creates transparency that leads to better insights and ultimately better decisions when it comes to managing cash flow during uncertain business conditions.
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