Illustrative case study
A $20M metal fabricator
Getting the numbers transaction-ready · Right Angle Finance & Accounting
Not a real company
The scenario
The example below is a composite built on generated data to highlight what an engagement with Right Angle produces; no numbers on this page come from a real client.
A second-generation metal fabricator in Colorado doing $20.8M in revenue has engaged Right Angle with the goal of optimizing their finances and operations ahead of a sale process within 2-3 years.
They asked for three things: a reporting dashboard the exec team could run the business on, an assessment of the accounting function including the close timeline, and strategic finance support that includes a long range plan and investor and lender relations.
At a glance
- Industry
- Metal fabrication
- Location
- Colorado
- Revenue FY26
- $20.8M
- EBITDA FY26
- $1.99M
- Headcount
- 61
- Accounting team
- 2.5 FTE
- Close timeline
- 22 days
- Ownership
- Family, 2nd gen
- Horizon
- Sale in 2-3 years
- Engagement
- 9 months
01
Executive dashboard
Revenue +3.2% · gross margin (230) bps ·
EBITDA (17.9%) vs plan
FY26 revenue finished +$0.7M / +3.2% favorable to plan on a 19.8% CAGR. Gross margin came in (230) bps unfavorable to plan, primarily driven by higher raw materials costs.
Profit and loss
FY26 summary, revenue through net income
Margins shown beneath each subtotal, with variances in percentage points.
Margin
Revenue and gross margin against plan
Actual
Plan
Gross profit bridge, FY25 to FY26
Gross margin bridge, FY25 to FY26
Gross margin by product line
FY25 versus FY26. Precision Components down 430 bps, the largest decline.
FY25
FY26
Revenue concentration
Top 10 accounts against the remaining 31.
Top 10 accounts
All others
Revenue by region
FY26 revenue
FY25
Working capital
Days inventory outstanding
48 to 64 days against a plan of 48. Stock built against the backlog.
Days sales outstanding
44 to 51 days against a plan of 45. Slow drift, not a collections problem.
Days payable outstanding
33 to 42 days against a plan of 35. Payables stretched to fund the build.
Labor and demand
Overtime as a share of direct hours
Overtime expense by department
Backlog by product line
Open order value at month end. Custom Fabrication is taking an increasing share as the book grows.
Key insights
- Revenue beat plan by 3.2% while gross margin missed it by 230 bps, costing $434K of budgeted EBITDA. The plan assumed the January price increase would hold margin at 26.8%. It did not, and the gap widened through the year to 270 bps behind in Q4.
- Raw material inflation is three quarters of the margin decline on its own. Price realization of $987K all but offset $973K of material cost in dollars, but it does not offset it in rate: price adds to the revenue denominator as well as to gross profit, so it recovered 347 bps against 468 bps taken by materials. Direct labor cost another 77 bps and scrap 31 bps, which is the 216 bps decline from FY25.
- Product mix is not the problem. On constant-price revenue, mix is +15 bps. Unit volume grew 24.8% against revenue growth of 19.8%, so any bridge built on average gross profit per unit charges the difference to mix and lets material cost off the hook.
- Revenue grew $3.4M and only $128K of it reached EBITDA. Net income finished flat at $569K against $571K. Every line below gross profit improved as a share of revenue: SG&A by 81 bps, depreciation 33 bps, R&D 19 bps. Cost of sales gave back 216 bps and took the year with it.
- Standard costs carry a 12/31/2024 effective date. Actual cost of sales of $15.70M ran $2.13M, or 15.7%, over the $13.58M those units carry at standard, against 6.8% in FY25.
- Inventory days ran 16 days over plan and payables 7 days beyond it. Stock built from 48 to 64 days against the backlog while the plan held 48. Payables were stretched from 33 to 42 against a plan of 35 to help fund it. Receivables drifted 44 to 51 days.
- The West is 46% of revenue at 22.5% gross margin, 198 bps below the portfolio. All five regions lost margin against FY25, between 170 and 350 bps, so this is an input cost problem rather than a geography problem. Outside the US is the smallest region at 4.9% and the fastest growing at +33.4%, at the best margin in the book.
- The largest account is 15.2% of FY26 revenue at 19.8% gross margin, 555 bps below the rest of the book. No FY26 price action was taken on it. The 31-account tail holds 34.8% of revenue at 27.8% margin against 22.7% for the top 10, so the smallest accounts are the most profitable ones.
- Overtime at 12.6% of direct hours against 7.0% prior year, 18.0% of payroll against 10.2% in FY25. That is $710K of overtime expense in FY26 and $1.06M across both years, with machining and welding running 15.8% of hours each.
- Backlog up 48% to $4.7M, with average order age from 26 to 42 days. Custom Fabrication carries most of the growth. Demand is being absorbed through overtime and inventory rather than capacity.
02
Accounting assessment
22-day close → 10 days
The function today
Team
2.5 FTE in-house, plus an outside CPA firm for tax and an annual review.
- Controller, 14 years in seat. Owns close, reporting, banking and the ERP. Deep process knowledge, but most processes have incomplete documentation.
- AP/AR clerk, full time. Cash application is disciplined and current.
- Bookkeeper, 20 hrs/week. Payroll entry, bank reconciliation, filing.
- Outside CPA. Tax provision, annual review, no involvement in monthly close.
Close
22 business days from period end to issued financials. The owner typically sees October results in the last week of November.
- 30+ manual journal entries each month, none standardized or pre-booked.
- Inventory counted quarterly, estimated in the two intervening months.
- Shop floor job tracker does not post to the GL. Actual job cost is keyed in from a report, by hand, after the fact.
- No close calendar. No owners, no cutoffs, no dependency order.
- No account reconciliation schedule. Balance sheet accounts are reviewed when something looks wrong.
SWOT
Strengths
- Source data is good. The ERP already captures job, part, product line and labor hours at the transaction level. The inputs for real costing exist.
- Cash discipline. DSO of 51 days against a blended 45-day term is reasonable, and cash application is current with no unapplied backlog.
- Controller depth. Fourteen years of context on customers, jobs and quirks that no system holds.
- Clean AR aging. Nothing material past 90 days, no disputed balances.
Weaknesses
- Standard costs 20 months stale. Drives a 15.7% variance to actual and misstates inventory valuation on the balance sheet.
- Close is manual end to end. 30+ journal entries and a hand-keyed production cost step put the timeline at the mercy of one person's availability.
- Incomplete documentation. No close calendar, no reconciliation schedule, no written procedures. The process lives in the controller's head.
- Quarterly inventory counts. Two months of every quarter carry estimated inventory, which may get flagged in a quality of earnings review.
Opportunities
- The ERP costing module is licensed and unused. Actual costing is a configuration exercise, not a purchase.
- 22 days to 10 without adding headcount. The time is in rework and sequencing, not in volume of work.
- Margin visibility supports repricing. Customer, product line and region margin is computable today and has never been looked at.
- Cycle counting is feasible. Part counts are low enough that rolling counts cover the population every quarter without a full physical.
Threats
- A 22-day close rules out real-time management. The exec team is acting on results a month and a half old, so there is no window to correct a bad month while it is still running. Buyers also read close timeline as a proxy for the quality of everything else.
- Single point of failure. If the controller leaves before the process is documented, the close and the sale both stall.
- Inventory valuation is exposed. Stale standards plus estimated counts is the combination that produces a working capital adjustment at closing.
- Concentration is unquantified in reporting. A 15.2% customer at dilutive margin will surface in diligence.
Recommendations, close timeline
| # | Action | Why it holds up the close | Days | Effort |
|---|---|---|---|---|
| 1 | Interface the shop floor job tracker to the GL | Cost of sales is relieved at standard during the month, so at close the controller has to post a variance entry built by hand from the shop floor job tracker to bring actual labor, material and overhead into the GL. That entry is where the 15.7% variance lands. It cannot start until every job on the floor is closed out, which is most of the delay, and it posts as a single summary number, so job-level cost never reaches the financials. | -4 | IT, 3 weeks |
| 2 | Move to quarterly cycle counting | The full physical count forces an estimate in two months of three, then a true-up that reopens the period. Rolling counts that cover the population each quarter leave no month resting on an estimate and no count to close around. | -3 | Ops, ongoing |
| 3 | Standardize and pre-book recurring accruals | Of the 30+ manual entries, roughly two thirds are the same every month. They are recalculated from scratch rather than templated. | -2 | Controller, 1 week |
| 4 | Publish a close calendar with owners and cutoffs | No dependency order means tasks wait on each other without anyone knowing the critical path. | -2 | Controller, 2 days |
| 5 | Hard cutoff on AP and receiving at day 2 | Invoices are accepted into the period through the second week, so accruals get revisited repeatedly. | -1 | Policy |
| 6 | Put balance sheet reconciliations in the close itself | Accounts are reviewed when something looks wrong, which means errors surface after the financials are issued and the period reopens. A named owner, a due day and a sign-off for every balance sheet account is the step that makes a 10-day close hold instead of being reopened in week three. | — | Controller, monthly |
| 7 | Update standard costs annually | Standards are 20 months old. An annual roll at the start of the fiscal year, with purchase price variance reviewed monthly so a mid-year reset is a decision rather than a surprise, is what keeps the variance investigation from reopening cost of sales every month. | — | Controller, annual |
Net effect 22 business days → 10 business days
No additional headcount. Items 1 and 2 carry the timeline; items 3 through 5 hold it.
Items 6 and 7 take no days out on their own. They are what stops the close from
reopening, and item 7 is the prerequisite for the margin reporting in section 01
to be trustworthy.
03
Strategic finance and investor reporting
1.34x FCC vs 1.20x test
Covenant compliance
Quarterly certificate to the senior lender. Term loan of $4.2M plus a $1.8M drawn revolver against trailing twelve month EBITDA of $1.99M.
Commentary excerpt
Fixed charge coverage of 1.34x leaves 0.14x of headroom against the 1.20x test.
The ratio has compressed for three consecutive quarters as scheduled amortization
stepped up and EBITDA growth lagged revenue. On the current trajectory the test is
reached in Q3 FY27. Recovering 150 bps of gross margin, which the repricing work in
section 01 supports, restores headroom to roughly 0.30x.
Monthly board package
Eleven pages, issued with the close. Built once as a template and refreshed from the model. The excerpt below is the November 2026 package.
- One-page summary with variance to plan and to prior year
- P&L, balance sheet and cash flow with bridge commentary
- Gross margin by product line and top ten customers, with concentration
- 13-week cash forecast with the revolver position
- Backlog, bookings and coverage in weeks
- Covenant compliance with forward projection
- Capex against the approved plan
- Open items and decisions requested
Summary page excerpt · November 2026
Revenue of $1.94M was $89K ahead of plan on stronger structural
assemblies volume. Gross margin of 23.9% missed plan by 290 bps,
of which 210 bps is raw material cost not yet recovered in
price. EBITDA of $205K was $32K behind plan.
Five-year plan
Driver-based, built from a revenue plan by region, a headcount plan and the margin drivers below. Not a growth percentage applied to last year.
Key assumptions. The FY30 gross margin is the sum of the first three drivers, each sized off FY26 actuals and phased in by year. Capex restraint protects cash and covenant headroom; it does not move margin.