From cost pressure to innovation opportunity: How companies stay profitable with professional costing

The economic conditions for manufacturing companies have changed dramatically in recent years. Rising energy prices, volatile raw material markets and disrupted supply chains are now as much a part of everyday life as growing competition from low-wage countries. At the same time, customers expect shorter delivery times, higher degrees of customisation and yet competitive prices. Added to this are regulatory requirements, for example in the area of sustainability and CO₂ accounting, which bring additional complexity to product costing. The result: constant cost pressure in almost all industries.

In this environment, it is no longer enough to calculate prices once and then maintain them over long periods of time. Customers demand flexibility, fast quotes and transparent pricing. At the same time, companies must secure their margins in order to remain capable of investing. Finding this balance is becoming a daily tightrope walk: prices that are too high jeopardise orders, while prices that are too low jeopardise profitability. This situation is exacerbated by the need to evaluate different variants, equipment options or project specifications economically, and in ever shorter periods of time. Sales teams are under pressure to submit reliable quotations within hours or a few days, while the actual costs are often only fully known weeks later. This discrepancy between quotation pressure and calculation certainty creates considerable risks for profitability.

As challenging as the situation is, it also presents a significant opportunity. Cost pressure is forcing companies to critically examine their internal processes and uncover inefficiencies that would have remained undetected in more economically relaxed times . Investing in professional costing solutions today not only creates cost transparency, but also regains strategic room for manoeuvre. Precise cost knowledge enables informed decisions about product portfolios, development projects and market strategies. It is the basis for evaluating innovations not only technically, but also economically, and for driving them forward in a targeted manner. Companies that understand costing as a strategic tool can turn cost pressure into a competitive advantage: through faster response times, better margin protection and the ability to direct resources specifically towards promising developments.

In this blog post, you will learn why conventional costing approaches no longer meet today's requirements and what characteristics distinguish modern costing. You will learn how professional costing solutions unlock concrete efficiency potential and what strategic added value they offer beyond pure cost determination. Finally, we will provide you with specific success factors for the introduction of professional costing solutions and show you which KPIs can be used to measure success.

Many companies still rely on costing methods that were developed in a less complex economic world. What has worked for years is now increasingly proving to be a bottleneck. Not only for efficiency, but also for strategic action.

In countless companies, Excel spreadsheets still form the backbone of costing. Experienced employees maintain costing models that have grown over the years, based on historical data, rules of thumb and personal know-how. This approach may still work for standard products or recurring orders, but it quickly reaches its limits when it comes to more complex requirements. Each department works with its own files, versions and assumptions. Sales calculates with different surcharge rates than work preparation, while controlling uses yet other cost centres. The result is isolated solutions that neither communicate with each other nor build on a common database. When an employee leaves the company, valuable costing knowledge is often lost, documented only in cryptic Excel formulas whose logic no one can fully understand anymore. This dependence on individuals and fragmented tools makes companies vulnerable and significantly limits their scalability.

If cost structures are not transparent, there is no basis for strategic decisions. Companies know that a product or project generates a certain contribution margin, but they cannot say exactly which components, process steps or materials are the biggest cost drivers. This lack of transparency slows down innovation: development departments cannot optimise in a targeted manner because it is unclear where there is potential for cost reduction. New Product ideas are difficult to evaluate because the calculation bases are missing or are based on outdated assumptions. Decisions about make-or-buy, variant diversity or technology alternatives are made on the basis of gut feeling rather than reliable figures. As a result, innovation projects are either approached with too much risk aversion or launched with unrealistic cost expectations. In both cases, potential remains untapped that could have been leveraged with transparent cost knowledge.

The lack of transparency is particularly evident in the turnaround times for quotations and calculations. When a customer submits a request for a customised solution, a complex process often begins: the sales department has to obtain information from the design department, which in turn consults the purchasing department regarding material prices, while the controlling department contributes overhead surcharges. Each stage takes time, and each interface is a potential source of error. It often takes several weeks before a reliable quotation is available. In dynamic markets, this sluggishness can mean the difference between winning and losing an order. In addition, the lack of transparency also makes post-calculation difficult: once projects are completed, it is often impossible to determine precisely where deviations from the preliminary calculation occurred. Without this feedback, learning from experience is left to chance, and systematic improvements are hardly possible. Long throughput times and a lack of transparency not only tie up resources, they also prevent the agility that companies need today to respond quickly to market changes.

Professional costing means more than just switching from Excel to a specialised software solution. It is about a fundamentally different approach to handling cost information, an approach that enables speed, accuracy and strategic control in equal measure.

The foundation of professional costing is a consistent data model in which all relevant cost information is centrally recorded and consistently linked. Instead of isolated tables and department-specific calculations, there is a uniform database that all parties involved can access. Material master data, production times, machine hourly rates, overhead surcharges and supplier conditions are maintained in one place and automatically transferred to all calculations. This consistency not only eliminates redundancies and inconsistencies, it also creates a common language within the company. When sales, design, work preparation, purchasing and controlling all work with the same cost logic, time-consuming coordination loops and misunderstandings are eliminated. Changes to master data, such as updated material prices or new manufacturing processes, are immediately incorporated into all current and future calculations. This timeliness and consistency is a prerequisite for calculations to be not only technically correct but also strategically meaningful. A consistent data model makes cost structures transparent and traceable, enabling analyses across products, projects and time periods and forming the basis for informed decisions at all levels of the company.

Professional costing systems are not limited to determining current costs. They enable different scenarios to be played out and their economic effects to be assessed in advance. What happens if the price of steel rises by 15 per cent? What are the cost implications of outsourcing a production step to a supplier? How does the profitability of a product change when production volumes increase? Simulation functions can answer these and similar questions in a matter of minutes, eliminating the need for time-consuming manual calculations. Predictive costing goes one step further: based on historical data, market trends and defined parameters, cost developments can be forecast before they occur. This enables companies to respond to cost risks at an early stage or identify opportunities for cost reductions. This forward-looking perspective transforms costing from a reactive documentation tool into a proactive management tool. Innovation projects can be calculated in various ways before significant development resources are invested. Product strategies can be reviewed for their economic viability while there is still time to make course corrections. The ability to run through future scenarios gives companies the confidence to make robust decisions even in uncertain times.

A key feature of professional costing is the consistent automation of recurring tasks. Many costing steps follow definable rules and do not have to be performed manually for each quotation. These include determining material costs from parts lists, calculating production times based on work plans, applying overhead surcharges and taking volume discounts into account. All of this can be automated. This not only reduces the time required considerably, but also lowers the error rate. Typing errors, forgotten cost items, or incorrectly applied surcharges are a thing of the past. Automation also means that calculations become reproducible and traceable. Every calculation follows the same logic, and deviations can be traced back to changed input parameters rather than to different approaches by different calculators. This standardisation creates quality and reliability and, at the same time, makes it possible to maintain or even increase calculation capacity even with increasing order volumes or product complexity.

Investing in professional costing solutions pays off in several ways. Companies that rely on modern calculation experience measurable improvements in key business processes, from the quotation phase to post-calculation.

Time is a decisive competitive factor in B2B business. Today's customers expect quick responses to their enquiries, often within hours or a few days. With conventional costing methods, this speed is almost impossible to achieve without compromising on quality. Professional costing systems dramatically reduce the time-to-quote: Instead of laboriously gathering information from various sources and linking it manually, users access a central database in which all relevant cost information is already stored. Standard calculations can be created in a matter of minutes, and even more complex enquiries with customer-specific requirements can be processed in a fraction of the time previously required. This acceleration gives companies a direct competitive advantage: they can respond to enquiries while competitors are still busy gathering information. At the same time, the number of enquiries that a sales team can process without requiring additional resources increases. The time saved can also be used to refine offers, for example to develop alternative solutions or advise customers on the most economically optimal configurations.

Manual calculation processes are prone to errors. Transposed digits, outdated price lists, forgotten cost items or incorrectly copied formulas can lead to significant calculation errors. In preliminary calculations, such errors either result in lost orders due to excessive prices or margin erosion due to excessively low prices. Professional costing solutions minimise these risks through automation and validation. Master data is maintained centrally and is always up to date, calculation logic is defined once and applied consistently, and plausibility checks warn of unusual values. The result is significantly higher data quality across all calculations. This consistency has far-reaching effects: quotations become comparable, calculations between different projects or products can be systematically analysed, and deviation patterns become recognisable. The improved data quality creates trust internally between departments as well as externally with customers who expect transparent and reliable prices. In addition, rework and corrections, which are inevitable with incorrect calculations, are reduced. The time that used to be spent on troubleshooting and error correction is now available for productive activities.

One of the biggest advantages of professional costing is the transparency it creates regarding cost structures. Companies gain detailed insights into the composition of their product or project costs and can precisely identify where the largest cost blocks lie. Material costs can be traced down to the individual part level, and process costs can be broken down to individual production steps. This granularity makes it possible to identify potential for optimisation in a targeted manner. If, for example, the analysis shows that a particular component contributes disproportionately to the total costs, the design and purchasing departments can work together to find alternatives. This could be through material substitution, supplier changes or design modifications. Process costs become transparent, revealing which manufacturing steps are particularly time-consuming or resource-intensive. These insights form the basis for continuous improvement processes and help companies to systematically optimise their value creation. Transparency also extends to overheads and surcharges: instead of flat-rate surcharges, differentiated allocation logics can be established that reflect the actual use of resources. This leads to fairer and more accurate calculations and avoids cross-subsidisation between products or projects.

Professional costing does not end with the placing of an order. It enables systematic post-calculation, in which the original cost estimates are compared with the actual costs incurred. This target/actual comparison is the basis for organisational learning: where were the calculations correct, where were there deviations, and what were the causes? Modern costing systems make this analysis much easier by providing structured evaluations and deviation reports. Cost overruns become visible at an early stage, while a project is still running, so that countermeasures can be taken in good time. The insights gained are fed back into the preliminary costing: empirical values are updated, costing parameters adjusted, risk surcharges adapted. This continuous improvement process leads to more accurate calculations from project to project. Improved controlling also strengthens the position vis-à-vis customers: in the event of additional claims or change requests, companies can argue their case on a sound basis and demonstrate additional costs transparently. Internally, systematic post-calculation creates a culture of cost responsibility in which all those involved understand how their decisions influence profitability.

Professional costing is much more than an operational tool for pricing. It becomes a strategic enabler that opens up new scope for action for companies and sets the course for sustainable success.

Research and development budgets are among a company's most critical resources. Incorrect allocation decisions can cost years and weaken the competitive position in the long term. With precise cost forecasts from professional costing systems, companies gain the certainty of being able to use their R&D funds in a targeted manner. Even in the early stages of development, reliable cost estimates can be made based on real data rather than rough assumptions. Development teams can evaluate different technical solutions not only in terms of their technical feasibility, but also their economic viability. This prevents projects from being launched that are technically fascinating but economically unfeasible. At the same time, projects are identified that appear unattractive at first glance but harbour considerable potential when analysed in detail. The more accurate forecasts also enable better portfolio management: Companies can optimally balance their development activities between different projects and direct resources to where they provide the greatest strategic benefit. This not only reduces bad investments, it also accelerates the time-to-market for promising innovations because decisions can be made faster and on a more informed basis.

In dynamic markets, the speed of decision-making determines success or failure. Companies that need weeks or months to assess the economic viability of an innovation lose valuable time to more agile competitors. Professional costing software makes it possible to evaluate new product ideas, technological approaches or business models economically in the shortest possible time. By integrating cost models, market data and simulation capabilities, business cases can be created that map various scenarios from best case to worst case. These scenarios take into account not only direct development and production costs, but also indirect effects such as economies of scale, learning curves or synergies with existing product lines. This provides management with a sound basis for decision-making and enables them to prioritise innovation projects according to objective criteria. This capability is particularly valuable in situations where several promising projects are competing for limited resources. Instead of making decisions based on gut feeling or political influence, companies can structure their innovation pipeline according to strategic relevance and economic potential. This leads to a higher success rate for innovation projects and strengthens the innovative power of the entire company.

Today's customers expect tailor-made solutions that are precisely tailored to their requirements. At the same time, companies must take care to keep their product complexity manageable and not fall into the trap of offering too many variants. Professional calculation helps to find this balance. Detailed profitability analyses reveal which product variants, equipment options or customisation possibilities are profitable and which ones jeopardise margins. Companies can align their product strategy in such a way that they combine an attractive customer offering with economic rationality. Modular product architectures can be reviewed for cost-effectiveness before they are implemented. The analysis also shows where standardisation makes sense and where customisation creates real added value. These findings flow directly into product development: design teams receive clear specifications on which cost targets to meet and understand the economic consequences of their design decisions. Sales teams can advise customers on economically optimal configurations instead of accepting special requests that later eat into margins. The result is product strategies that are both customer-oriented and profitable. This is a decisive competitive advantage in markets where quality and cost-effectiveness are equally important.

One of the often underestimated strategic advantages of professional costing solutions is their integrative effect. In many companies, there are silos between sales, technical departments, purchasing and controlling that hinder efficient processes and lead to suboptimal decisions. Sales promises services whose feasibility is doubted by engineering, while purchasing points out longer procurement times or minimum order quantities, and controlling warns all parties involved of unrealistic cost estimates. These conflicts often arise from a lack of transparency and differing levels of information.

Specialised costing systems create a common database and language that connects all parties involved. Sales staff gain a better understanding of which technical decisions have which cost consequences and can access current supplier conditions during customer meetings. Design engineers recognise how their design decisions influence marketability and profitability and can see directly which materials are available and under what conditions. The purchasing department can immediately incorporate its negotiation successes and current purchase prices into the calculation and gains transparency about which components or materials are particularly cost-critical. This is valuable information for supplier negotiations and make-or-buy decisions. Controllers can base their analyses on the same data used to calculate quotations.

This common basis promotes dialogue and leads to more coordinated decisions. Purchasing is involved in calculation processes at an early stage and can proactively identify alternatives if certain materials or components cause cost problems. Conflicts are resolved more objectively because they are based on facts rather than assumptions. Interdisciplinary teams can work together more efficiently because they no longer have to waste time reconciling different sets of figures. This improved collaboration not only speeds up processes, it also leads to better results: quotations that are technically feasible, procurement-secured, commercially sound and commercially convincing.

What is not measured cannot be controlled. The introduction of professional costing solutions should result in concrete, measurable improvements. The following key performance indicators help to quantify success and enable continuous optimisation.

The quotation turnaround time, or time-to-quote, is one of the most immediate indicators of the success of a costing solution. It measures the time from the receipt of a customer enquiry to the submission of a complete, calculated quotation. This key figure is easy to record and provides quickly usable insights. In many companies, the average quote turnaround time decreases by 40 to 70 percent after the introduction of professional costing systems. Not only the average value is relevant, but also the distribution: How big is the range between the fastest and slowest quotes? A lower dispersion indicates standardised, reliable processes. It is also worth differentiating the turnaround time according to complexity categories: standard quotations should be evaluated differently than highly complex special solutions. A shorter time-to-quote has a direct impact on business: higher order probability, better customer satisfaction and the ability to process more enquiries without hiring additional staff. The key figure should be collected regularly and monitored over time to ensure that the improvements are sustainable and not negated by gradual process erosion.

The success rate, the proportion of bids won out of the total number of bids submitted, is an important indicator of the competitiveness of the calculation. A success rate that is too low may indicate that calculations are too expensive, while a very high rate may signal that calculations are too low and margin potential is being wasted. The optimal success rate varies depending on the industry and business model, but is typically between 20 and 40 percent in the project business. The decisive factor is the margin: a high success rate combined with stable or rising margins shows that the calculation is both accurate and competitive. Professional costing solutions enable systematic evaluation of bids: For which product groups is the success rate particularly high or low? Are there correlations between bid turnaround time and probability of success? What factors distinguish won bids from lost bids? These analyses provide valuable insights for strategic alignment. The margin development should be considered in a differentiated manner: gross margin, contribution margin and operating margin can tell different stories. It is also important to analyse margin deviations between different products, customers or projects. This often reveals considerable potential for optimisation. Continuous monitoring of these KPIs makes it possible to react early to undesirable developments and to continuously refine the calculation logic.

For innovation-driven companies, the accuracy of development budgeting is a critical success factor. The deviation between the originally budgeted development costs and the actual expenses incurred shows how precisely innovation projects are planned and managed. Large deviations indicate systematic problems: either projects are calculated too optimistically, or there is a lack of cost control during the development phase. Professional costing solutions improve this key figure in several ways. Firstly, they enable more accurate budget estimates in the early stages of a project because they are based on structured cost models rather than rough assumptions. Secondly, they allow for continuous forecast updates during the project period: instead of rigid budgets that are set at the start of the project and settled at the end, a rolling forecast is created that takes current developments into account. Thirdly, they create transparency regarding cost causation: which development activities cause which costs? Where do additional expenses arise? This transparency enables timely control interventions. The target is often a maximum deviation of plus/minus ten percent between budget and actual costs. If companies achieve this range, they can invest more boldly in innovation because planning reliability increases. The analysis should also differentiate between different types of projects: incremental improvements should be more precisely plannable than radical innovations with a high degree of novelty.

The deviation between preliminary and final calculations is probably the most meaningful KPI for the quality of a professional costing system. It shows how well the original cost estimate was able to predict the actual costs incurred later on. Systematic deviations in one direction, for example when post-calculations regularly show higher costs than pre-calculations, indicate structural problems: overly optimistic assumptions, incomplete cost recording or risk factors that have not been taken into account. Random deviations in both directions, on the other hand, are normal and unavoidable to a certain extent. As a guideline, an average deviation of less than five percent is considered excellent, and less than ten percent is considered good. However, more important than the average value is the analysis of outliers: Which projects had particularly large deviations and why? Are there any patterns? Common causes include unexpected technical difficulties, changes in project scope, supplier delays or inefficient processes. The systematic evaluation of these deviation analyses forms the basis for continuous improvement: findings from post-calculation are fed back into the pre-calculation logic, risk premiums are adjusted, and critical cost drivers are monitored more closely. Companies that consistently use this feedback achieve steadily increasing calculation accuracy over time.

The challenges facing manufacturing companies today are not getting any smaller. Global competition, volatile markets and rising customer demands are here to stay. In this environment, the ability to understand costs precisely, calculate quickly and manage strategically determines success or failure.

Costing has long been considered a necessary evil, an administrative duty that must be fulfilled but has no strategic value. This view is outdated. In a world where margins are under pressure and innovation cycles are accelerating, costing is becoming a strategic differentiator. Companies that invest in professional costing solutions gain more than just more efficient processes. They gain room for manoeuvre: the ability to respond more quickly to customer enquiries, to evaluate innovations in an informed manner, to develop product strategies based on data and to allocate resources optimally. They transform cost pressure from a threat into an opportunity for innovation because they understand where costs arise and how they can be influenced. Modern costing creates transparency that goes far beyond mere price determination. It becomes the nervous system of the company, bringing together information from all areas and making it usable for strategic decisions. This holistic perspective on costs makes it possible to recognise connections that remain hidden in silo structures: How do design decisions influence manufacturing costs? Which product variants are real margin drivers? Where are investments in automation worthwhile? Cost management thus evolves from a reactive documentation task to a proactive design discipline, from an obligation to an opportunity.

It is tempting to put off investing in professional costing systems. After all, the existing processes work somehow, and there are always more urgent tasks to be done. But this hesitation can be costly. The longer companies work with outdated costing methods, the more opportunities they miss: orders that go to faster competitors. Innovation projects that are not launched because their economic viability is unclear. Margins that erode because cost deviations are identified too late. The costs of inaction are often higher than the investment in modern solutions, even if they are less visible. What's more, the transformation doesn't get any easier if you wait. On the contrary, with growing product complexity, increasing variety and rising order volumes, the changeover becomes more costly. The best time to modernise your costing is now, before the pressure becomes so great that only hasty emergency solutions are possible. Companies that act today gain a time advantage over their competitors. They build up costing expertise while others are still struggling with Excel spreadsheets. They make better decisions because they can draw on more solid data. They are more flexible because their processes are designed for change. The path to professional costing is no trivial exercise. It requires investment, commitment and perseverance. But it is one of the most effective measures companies can take to secure their long-term competitiveness. At a time when cost pressure has become the norm, the ability to understand costs precisely and manage them intelligently is becoming a decisive factor for success. Companies that seize this opportunity will not only become more profitable, but also more innovative, agile and future-proof.