In a steel operation, closing the books isn’t just about tying up numbers—it’s about wrestling a beast of moving parts, unpredictable scrap rates, and production variances that won’t sit still. For controllers, this is the most complicated week of the month. And in this environment, accuracy is everything.
Unlike in simpler industries, your costs don’t line up neatly. You’ve got multi-stage processes, coils consumed at different rates, and finished goods that aren’t always what they were forecasted to be. So how do you ensure your financials actually reflect what’s happening on the shop floor?
Let’s break it down.
The Challenge of Work in Progress (WIP)
WIP is notoriously tricky in steel because of the way material flows—and how long it stays in process. Heat treatment, slitting, coating, cutting, reworking—all of it can stretch across multiple days or departments.
To close the books with confidence, controllers need:
A clear snapshot of what’s still in production
An understanding of the current value of that WIP
Visibility into which jobs are truly complete
The risk? Overstating assets, misrepresenting COGS, and skewing margin analysis. That’s why tight integration between production systems and ERP is critical.
Scrap Isn’t Just Waste—It’s Cost
Steel scrap is unavoidable, but it should never be unaccounted for. Whether it’s edge trim, shearing loss, or rejected parts, scrap must be tracked and reconciled at every stage.
Controllers should ensure:
Scrap is recorded accurately and linked to specific jobs or processes
Yield loss is factored into costing, not just assumed
There’s clear differentiation between recoverable and unrecoverable scrap
If scrap isn’t tied back to job cost, your margin reports lie. And if it isn’t reported consistently, you lose the ability to improve over time.
Production Variance: The Margin Killer
Even the most tightly run operations encounter variance—between expected cost and actual cost, between planned output and real yield.
Controllers need to:
Track material usage variance: Did you use more or less coil than planned?
Monitor labor variance: Was actual labor time aligned with standards?
Identify equipment or downtime-related variance
Variance isn’t just a post-mortem metric. It’s a leading indicator of process breakdowns, outdated standards, or bad planning assumptions.
Closing the Loop With Operations
One of the biggest mistakes finance teams make is closing the books in isolation. In steel, finance and operations must be in sync.
Are operations confirming job completions daily?
Is WIP being reviewed collaboratively before close?
Are exceptions being flagged in real time?
This cross-functional collaboration turns your month-end scramble into a predictable routine—and helps identify issues before they cascade.
Automation and ERP Discipline
Manual reconciliation in a steel environment is a recipe for delay and inaccuracy. Controllers should lean on automation and systems integration to stay ahead:
Use barcoding or RFID to track coil movement in real time
Configure ERP to prompt for scrap entry at key production stages
Automate WIP roll-forward to reduce manual entry
Your goal isn’t just speed—it’s confidence in the numbers.
What to Watch on Close Day
When it’s time to close the books, controllers should be laser-focused on:
WIP balance accuracy and job status
Scrap reconciliation across departments
Variance analysis, especially large swings
Inventory valuation updates and adjustments
Jobs closed during the period—were they fully costed?
Anything that looks off should be investigated before final reports are run. Because if your numbers don’t tell the full story, leadership decisions may be based on fiction.
Final Thought: Clarity in the Chaos
Steel operations are messy. That’s reality. But your financial close doesn’t have to be. Controllers who build rigor around WIP, scrap, and variance tracking give their companies something rare in a volatile market: clarity.
And when executives ask, “What really happened last month?”—you’ll have more than numbers. You’ll have answers.
