Engineering Accountants

Accountants for precision engineering, subcontract machining, fabrication, toolmaking and engineering services businesses. Engineering firms live on quoted work, tight tolerances and customers far larger than they are. The finance function has to be built around that, not around a generic small-company template.

What we do for engineering businesses

• Quote to cash — estimating that reflects setup, changeover, programming and inspection time, so that quoted margin survives contact with the shop floor.
• Job costing — actual against quoted by job, with the variance visible while the job is still running.
• Machine hour rates — recovery rates by machine or cell, including depreciation, power, maintenance and operator time, rather than a single works rate that misprices half the portfolio.
• Long-term contracts — revenue recognised as work is performed, with accrued and deferred income handled properly rather than smoothed at the year end.
• Working capital — the gap between buying material, holding WIP and being paid by a tier-one customer on extended terms, forecast weekly where it matters.

Tax reliefs engineering firms routinely miss

• R&D relief on process development, bespoke tooling and fixture design, materials substitution and getting a part to hold tolerance at volume — see R&D tax credits for manufacturing.
• Full expensing and the £1m annual investment allowance on machine tools, inspection equipment and workshop fit-out — see capital allowances.
• Patent Box at an effective 10% corporation tax rate where a product or process is patented.
• Apprenticeship funding and training incentives, and getting the accounting for them right.

Supplying larger customers

Aerospace, automotive, defence, energy and medical supply chains bring requirements that cost money to meet: quality accreditation, traceability, extended payment terms, retentions, tooling ownership questions, long-term price agreements, and customer audits that ask about your financial stability as well as your process. We prepare the financial information those audits ask for, and model the working capital effect of a big contract before you sign it rather than after.

People

Skilled labour is the binding constraint in most engineering businesses. We handle payroll including shift premiums, overtime and pension auto-enrolment, advise on employment status for contract engineers under the off-payroll working rules, and set up share incentives — including EMI options — where retention of key people is the strategic risk.

Ownership, succession and value

Engineering firms are frequently owner-managed, second generation, and worth more than the owner thinks. We prepare businesses for sale or transition — cleaning up the balance sheet, separating property from trade, evidencing sustainable earnings — and advise on the routes available, including a trade sale, a management buy-out or an employee ownership trust. See business valuation and business restructuring.

Who we act for

• Precision machining, CNC and subcontract engineering businesses
• Fabrication, welding and sheet metal firms
• Toolmakers, mould makers and pattern shops
• Design and engineering consultancies, and test and inspection businesses
• Electronics and electro-mechanical assemblers

Part of our manufacturing accountants practice, based in Guildford and acting for engineering businesses across Surrey, London and the UK.

Frequently asked questions

How should we set our machine hour rate?

By building it from the actual cost of running that machine — depreciation or lease cost, power, maintenance and consumables, tooling, operator time and a share of works overhead — divided by realistically available productive hours, not theoretical capacity. A single factory-wide rate systematically overprices work on cheap machines and underprices work on expensive ones.

Does subcontract machining qualify for R&D relief?

It can, where the work involves resolving genuine technological uncertainty — holding a tolerance that available methods could not reliably achieve, developing a process for a difficult material, or designing bespoke tooling or fixtures. Simply machining to a customer’s drawing with established methods does not qualify. Note also that who bears the risk and who owns the resulting knowledge affects which party can claim.

A large customer wants 90-day terms. What should we model?

The full working capital effect: material bought and paid for early, WIP held during the run, then a long wait for cash, against your own supplier terms and any facility limits. A profitable contract can still break a business on cash. We model it before signature and, where needed, structure invoice or asset finance around it.

Are contract engineers inside IR35?

It depends on the reality of the engagement, and where they supply through their own limited company and you are a medium or large client, the determination is legally yours to make. We review the arrangements, prepare defensible status determinations and operate the deemed-employer payroll where it is required.

How do we value an engineering business for sale or succession?

Usually on sustainable maintainable earnings with a sector multiple, adjusted for surplus assets, property, owner remuneration and customer concentration. Concentration is the factor that most often moves the price — a business where one customer is half of turnover is valued very differently. Preparation two or three years ahead of a sale typically has more effect on price than the negotiation itself.

Do you work with businesses using ERP or MRP systems?

Yes. We work with the system you have, and focus on the data quality that makes it useful — bills of material, routings, goods-received discipline and stock accuracy — rather than recommending a replacement as a first response.