How a Manufacturing Group Rebuilt Its Internal Control Framework

A large industrial manufacturing group faced a pattern of unexplained margin erosion, delayed closings and recurring inventory write-offs. Management suspected that the root cause lay in fragmented and outdated internal control procedures, but lacked a clear map of where the weaknesses were. The board audit committee requested an independent review of internal control procedures to obtain a structured diagnosis and a prioritized remediation roadmap. Radner’s team was invited to perform this work across three production plants and the central finance function. The engagement was framed not only as a compliance exercise, but as a way to stabilize operations and support the next phase of growth.

At the outset, Radner’s team conducted a series of scoping workshops with the CFO, plant controllers and the head of internal audit. These sessions clarified which processes were most critical: purchasing and supplier management, production planning, inventory management, revenue recognition and financial closing. The team mapped existing documentation, including process narratives, flowcharts and policy manuals, and quickly noticed that many procedures were outdated or existed only as informal practices. To structure the work, Radner’s team aligned the assessment with a recognized internal control framework and defined clear evaluation criteria. This allowed the company to compare its current state against leading practices in a transparent way.

Fieldwork began with detailed walkthroughs of end-to-end processes in each plant. Radner’s team followed actual transactions from purchase requisition through goods receipt, production, shipment and invoicing. During these walkthroughs, the consultants observed how employees executed controls in real time, rather than relying solely on written procedures. It became evident that certain key controls, such as three-way matching and segregation of duties in the ERP system, were inconsistently applied. In some plants, manual spreadsheets had become de facto sub-ledgers, creating reconciliation risks and opportunities for error. These observations formed the basis for a preliminary risk map.

Parallel to process walkthroughs, Radner’s team performed targeted data analysis on large transaction populations. Using extraction tools, the team analyzed purchase orders, goods receipts, invoices and journal entries over a twelve-month period. The analysis highlighted unusual patterns, such as repeated override of approval limits and frequent manual price adjustments close to month-end. These anomalies did not necessarily indicate fraud, but they did reveal control design gaps and a culture of workarounds. By combining quantitative evidence with qualitative interviews, the team built a nuanced picture of how controls actually operated in practice.

One of the most critical findings related to inventory management. Physical counts were performed annually, but cycle counts were sporadic and not risk-based. Radner’s team discovered that adjustments from physical counts were posted in aggregate, without investigation of root causes. This practice masked process issues in receiving, production reporting and scrap management. In addition, system access rights allowed certain users to both record and approve inventory adjustments, violating basic principles of segregation of duties. The team documented these weaknesses and quantified their potential financial impact, which helped management understand the urgency of remediation.

Another area of concern was the financial closing process. The monthly close routinely extended to twelve working days, with frequent late adjustments and limited analytical review. Radner’s team mapped the closing calendar and identified bottlenecks, such as manual reconciliations between production systems and the general ledger. The review of internal control procedures around closing revealed that many reconciliations lacked documented review, and some key controls were performed by staff without clear delegation of authority. This created both operational inefficiency and heightened risk of misstatement.

In purchasing and supplier management, Radner’s team assessed controls over vendor onboarding, master data changes and contract compliance. The review showed that vendor master data changes were not always supported by formal requests, and audit trails in the ERP system were incomplete. In addition, approval matrices were not consistently updated when managers changed roles, leading to outdated authorization limits. The team recommended a structured vendor master governance process and stronger controls over change management in master data. These recommendations were tailored to the company’s existing systems to ensure feasibility.

Throughout the engagement, Radner’s team maintained close communication with management through weekly status meetings. These sessions were used to validate preliminary observations, clarify process nuances and avoid surprises in the final report. The team presented early insights in the form of heat maps, highlighting high, medium and low risk areas across processes and locations. This visual approach helped non-technical stakeholders quickly grasp where attention was most needed. It also allowed management to start addressing certain quick wins even before the full review was completed.

Once fieldwork concluded, Radner’s team consolidated findings into a structured report. Each finding included a description of the control gap, the associated risk, examples from testing and a practical recommendation. The report distinguished between design deficiencies, where controls were missing or poorly defined, and operating deficiencies, where controls existed but were not consistently performed. For high-risk issues, the team proposed specific remediation steps, responsible owners and target timelines. This level of detail transformed the report from a diagnostic document into a concrete action plan.

To support implementation, Radner’s team facilitated a series of design workshops with process owners. In these sessions, the team and client jointly redesigned key controls, such as approval workflows, inventory count procedures and closing checklists. The focus was on embedding controls into existing systems and routines, rather than creating additional manual steps. For example, approval hierarchies were reconfigured in the ERP system to enforce authorization limits automatically. Inventory cycle counts were redesigned to be risk-based, with higher frequency for high-value and high-movement items. These changes aimed to strengthen control while also improving efficiency.

Training played a crucial role in ensuring that new procedures would be sustained. Radner’s team developed targeted training materials for finance staff, plant managers and operational teams. The training explained not only what the new controls were, but why they mattered for financial integrity and operational performance. Case studies from the company’s own data were used to illustrate how control failures had previously led to write-offs and rework. This approach helped build a shared understanding of the importance of control culture and accountability. It also encouraged employees to raise concerns proactively when they noticed potential control issues.

Within six months of completing the review, the company began to see tangible benefits. Inventory write-offs decreased significantly as improved receiving and production reporting reduced discrepancies. The monthly closing cycle shortened from twelve to eight working days, freeing up finance resources for analysis rather than firefighting. External auditors reported fewer control-related findings and reduced the extent of certain substantive testing procedures. Management gained greater confidence in the reliability of financial information, which supported more timely and informed decision-making.

The board audit committee particularly valued the clarity of the risk-based roadmap delivered by Radner’s team. The roadmap allowed the committee to monitor progress on remediation and to allocate oversight attention where it was most needed. Over time, the company integrated key control indicators into its regular management dashboards. This shift from reactive issue handling to proactive monitoring marked a significant cultural change. The review of internal control procedures thus became a catalyst for broader governance improvements.

An additional benefit emerged in the area of supplier negotiations. With cleaner data and stronger controls over purchasing and inventory, the company could better analyze supplier performance and total cost of ownership. This enabled more strategic sourcing decisions and improved leverage in contract discussions. The finance and procurement functions began to collaborate more closely, using reliable information to drive savings initiatives. These outcomes illustrated how robust internal controls can directly support commercial objectives.

From an operational standpoint, plant managers appreciated that the redesigned controls reduced ambiguity in roles and responsibilities. Clearer procedures and system-enforced approvals meant fewer disputes about who was authorized to make which decisions. This clarity reduced delays and improved coordination between production, logistics and finance. Employees reported that, while the transition required effort, the new way of working ultimately made their jobs easier and less error-prone.

In the longer term, the strengthened control environment positioned the manufacturing group for its planned expansion into new markets. Potential investors and lenders viewed the improved governance and documented control framework as a sign of maturity. When the company later pursued an acquisition, the existing internal control structure facilitated integration planning and risk assessment. The initial review of internal control procedures thus delivered value far beyond the immediate remediation of weaknesses.

Overall, the engagement demonstrated that a structured, data-informed and collaborative review can transform internal controls from a perceived burden into a strategic asset. By aligning control design with operational realities and business goals, Radner’s team helped the manufacturing group reduce risk, enhance efficiency and build trust in its financial reporting. The case showed that even in a complex industrial environment, disciplined attention to control procedures can unlock both stability and competitive advantage.