A tray of cakes that costs more than it sells for
Your bakery, print shop, woodwork workshop or garden centre exists to give people a route into work: people leaving prison, adults with learning disabilities, young people who have been out of education, people recovering from long-term illness. They make real products for real customers, supported by a job coach or supervisor.
A café chain asks for a price on a regular order of traybakes. The manager works out ingredients and packaging, adds something for staff time and overheads, and quotes. Three months in, the order feels like it is losing money. A tray that an experienced baker makes in forty minutes takes a trainee two hours, with a supervisor checking each stage, and one tray in six is not good enough to sell. But the manager cannot say whether the order is unprofitable, or whether the trading is fine and the support is simply a cost that the employability grant is meant to cover.
Why costing is harder for a social enterprise
A conventional business costs a product from the time an efficient worker takes. A work integration social enterprise deliberately does things differently, and that is the point. The trouble is that its books usually do not show the difference.
- Trainee hours include learning time, not just production time.
- Job coaches and supervisors split their time between supporting people and producing goods.
- Wastage and rework are higher while people are learning, and fall as they progress.
- Different trainees are at different stages, so the same product takes different amounts of time depending on who makes it.
- Grants and contracts pay for support, while customers pay for products, but the costs sit together.
How you set prices, and how costs are split between trading and funded support, is for your board and accountant. We do not advise on pricing strategy. We make the underlying numbers visible so those decisions rest on something firmer than a feeling.
What blurred costing costs you
Some products are priced below what they cost to make even with an experienced worker, and the losses are hidden in the support budget. Others are priced so high, to cover support costs, that customers go elsewhere, and the trading arm shrinks along with the placements it offers.
Funders ask what their money pays for. Without separate figures, you cannot show that the grant covers support and not a subsidised product. When a big customer order comes in, the manager cannot say with confidence whether to accept it.
A costing model with trading and support separated
What we build is a light production and time record, feeding a costing model the manager can use for quotes and reviews.
- Each product or service is set up with its materials, packaging and a standard production time, the time an experienced worker would take, agreed with your supervisors.
- Trainees and supervisors log time on a tablet in the workshop against jobs, with a simple split for supervisors between producing and supporting.
- Wastage and rework are logged by product, with a reason, such as learning, equipment or materials.
- Each job shows the standard commercial cost, the actual production cost and the extra time attributable to training and support, calculated from the logs.
- The extra support cost is reported against the funded programme or contract that pays for it, and the commercial cost against the trading activity.
- The manager has a quote tool that starts from the commercial cost and shows the margin, with the support cost shown alongside so the board can see both.
| Cost element | Where it belongs |
|---|---|
| Materials and packaging | Trading |
| Production at standard time | Trading |
| Extra trainee time while learning | Support, per your board's rules |
| Job coach support time | Support, per your board's rules |
| Wastage from learning | Recorded separately for the board to decide |
| Overheads | Split by the rule your board agrees |
Totals flow into your accounting software, such as Xero or QuickBooks, through tracking categories, so the split shows in your management accounts too.
The next quote and the next funder report
The café chain asks for a price on a larger order. The manager opens the quote tool: the commercial cost of a tray at standard time, materials at current prices, and a margin. She quotes on that. The extra trainee and supervision time for the order will be reported against the employability programme, which exists to pay for exactly that.
At the quarterly review the board sees that wastage from learning has fallen as the current group of trainees progressed, and that the traybake line covers its commercial costs. The funder report shows the hours of support delivered, taken from the same logs.
Is this how your costing feels?
- You are not sure whether a product loses money or just carries support costs.
- Trainee and supervisor time are recorded as one wage figure.
- Wastage while learning is not recorded.
- Quotes for customer orders are based on rough estimates.
- Funders ask what their money pays for, and the answer is hard to separate.