FY 2026 Cost Structure Analysis

1Executive Summary

Revenue grew 65% year-over-year while total costs grew only 40% — a 12.8-point improvement in cost-to-revenue efficiency. But the aggregate hides three structural risks: overhead more than doubled, a one-time July rent event of ~$142K distorted the facilities line, and 97% of costs post to the GL with no department attribution.

2Cost Structure by Major Cost Center

Costs were classified into four cost centers by GL account (mapping rules in §8). The benchmark test for every center: did it grow slower than the +65.2% revenue growth?

3Monthly Cost Trend & Anomaly Detection

Pulling the 20-month trend surfaced two anomalies that the annual totals concealed — both change the optimization strategy.

4Department Breakdown — and the Attribution Gap

The single most consequential finding of this analysis is structural, not financial: 97.3% of all cost postings carry no department code, making true departmental P&L accountability impossible today.

The Sales department's −88% swing reflects a coding-practice change (COGS Purchases stopped being tagged to Sales in FY26), not a real cost reduction — further evidence that department dimension usage is inconsistent.

5Largest Cost Lines, Variances & Benchmarks

Top cost-line variances (accounts > $5K YTD, ranked by dollar growth)

Benchmark comparison

* Benchmark ranges are general industry rules-of-thumb for mid-market product / distribution businesses, applied from analyst knowledge — not pulled from a live subscription benchmark service. Validate against your industry code (e.g., RMA Annual Statement Studies, IBISWorld) before using in board materials. See Assumptions (§8).

6Procurement Concentration — Top 10 Vendors (FY26 YTD)

The top 10 vendors represent ~$1.90M of billed spend — negotiating leverage exists precisely because purchase volume grew 40% YoY. High bill-count vendors (B. Brown at 242 bills, Bull's Head at 257) are also process-cost candidates for consolidated invoicing.

7Top Five Optimization Opportunities

Ranked by annualized savings potential, risk-adjusted. Combined opportunity: $170K–$310K per year (≈ 4–7% of the current cost base).

Strategic guardrails

• Protect the operating-leverage win: cap overhead budget growth at ≤ 50% of the revenue growth rate; the 12.8-point efficiency gain is the number to defend.
• Monthly overhead variance review until rent and D&A normalize — overhead is the only cost center growing faster than revenue.
• Fix the data foundation first (#5): every subsequent quarter's analysis, budget, and manager scorecard depends on it.
• Act on procurement now: the 40% volume-growth negotiating window is perishable.

8Methodology, Queries & Assumptions

Full reproducibility: every number in this report traces to the SuiteQL queries below, run against the NetSuite GL on August 15, 2026.

Assumptions & classification rules

• Fiscal year = calendar year. FY 2026 runs Jan 1 – Dec 31, 2026 (confirmed via accounting period FY 2026, internal id 205). "YTD" = Jan 1 – Aug 15 in both years for a true like-for-like window.
• Posting GL only. All figures come from transactionaccountingline joined to transaction where posting = 'T', account types COGS, Expense, OthExpense (costs) and Income, OthIncome (revenue). Non-posting documents (POs, SOs) are excluded.
• Sign convention. Expense amounts are natively positive in transactionaccountingline.amount; revenue is stored negative and was negated for display. Vendor bill foreigntotal values post negative in this account, so vendor spend uses ABS().
• Cost-center mapping (account-based, since department coding is sparse): Labor = accts 6210, 6230, 6070, 5020, 6312, and any account containing "Labor"; Technology = the 6650-series IT expense tree (6655, 6670–6674) + IT equipment depreciation; Procurement/COGS = remaining 5000-series; Overhead = everything else (facilities, T&E, insurance, D&A, professional fees, bad debt, other expenses).
• Department attribution uses transactionline.department joined via tl.id = tal.transactionline; lines with null department are reported as "Unattributed."
• Benchmarks are illustrative mid-market product/distribution rules-of-thumb from analyst knowledge, not a live benchmarking feed. Validate against RMA / IBISWorld / your industry association for board-grade use.
• Aug 2026 is a partial month (through the 15th). Annualization estimates scale YTD by 365/227 where noted.
• Currency: amounts are as posted in the GL base ledger; no FX restatement applied.

Source queries

SELECT
  COALESCE(d.name, 'No Department') AS dept,
  a.acctnumber, a.fullname AS account_name, a.accttype,
  ROUND(SUM(CASE WHEN t.trandate >= TO_DATE('2026-01-01','YYYY-MM-DD')
       THEN tal.amount ELSE 0 END), 2) AS fy2026_ytd,
  ROUND(SUM(CASE WHEN t.trandate < TO_DATE('2026-01-01','YYYY-MM-DD')
       THEN tal.amount ELSE 0 END), 2) AS fy2025_ytd
FROM transactionaccountingline tal
JOIN transaction t ON tal.transaction = t.id
JOIN transactionline tl ON tl.transaction = t.id AND tl.id = tal.transactionline
JOIN account a ON tal.account = a.id
LEFT JOIN department d ON tl.department = d.id
WHERE t.posting = 'T'
  AND a.accttype IN ('Expense','OthExpense','COGS')
  AND ((t.trandate BETWEEN TO_DATE('2026-01-01','YYYY-MM-DD') AND TO_DATE('2026-08-15','YYYY-MM-DD'))
    OR (t.trandate BETWEEN TO_DATE('2025-01-01','YYYY-MM-DD') AND TO_DATE('2025-08-15','YYYY-MM-DD')))
GROUP BY COALESCE(d.name,'No Department'), a.acctnumber, a.fullname, a.accttype
HAVING SUM(ABS(tal.amount)) > 0
ORDER BY COALESCE(d.name,'No Department'), a.acctnumber

SELECT
  ROUND(SUM(CASE WHEN t.trandate >= TO_DATE('2026-01-01','YYYY-MM-DD')
       THEN -tal.amount ELSE 0 END), 2) AS revenue_fy2026_ytd,
  ROUND(SUM(CASE WHEN t.trandate < TO_DATE('2026-01-01','YYYY-MM-DD')
       THEN -tal.amount ELSE 0 END), 2) AS revenue_fy2025_ytd
FROM transactionaccountingline tal
JOIN transaction t ON tal.transaction = t.id
JOIN account a ON tal.account = a.id
WHERE t.posting = 'T'
  AND a.accttype IN ('Income','OthIncome')
  AND ((t.trandate BETWEEN TO_DATE('2026-01-01','YYYY-MM-DD') AND TO_DATE('2026-08-15','YYYY-MM-DD'))
    OR (t.trandate BETWEEN TO_DATE('2025-01-01','YYYY-MM-DD') AND TO_DATE('2025-08-15','YYYY-MM-DD')))

SELECT
  TO_CHAR(t.trandate,'YYYY-MM') AS mth,
  ROUND(SUM(CASE WHEN a.accttype='COGS' THEN tal.amount ELSE 0 END),2) AS cogs,
  ROUND(SUM(CASE WHEN a.acctnumber IN ('6210','6230','6070')
       OR a.fullname LIKE '%Direct Labor%'
       OR a.fullname LIKE '%Workers'' compensation%' THEN tal.amount ELSE 0 END),2) AS labor_sga,
  ROUND(SUM(CASE WHEN a.fullname LIKE '%IT Expenses%' THEN tal.amount ELSE 0 END),2) AS technology,
  ROUND(SUM(CASE WHEN a.acctnumber='6610' THEN tal.amount ELSE 0 END),2) AS rent,
  ROUND(SUM(tal.amount),2) AS total_cost
FROM transactionaccountingline tal
JOIN transaction t ON tal.transaction = t.id
JOIN account a ON tal.account = a.id
WHERE t.posting='T' AND a.accttype IN ('Expense','OthExpense','COGS')
  AND t.trandate BETWEEN TO_DATE('2025-01-01','YYYY-MM-DD') AND TO_DATE('2026-08-15','YYYY-MM-DD')
GROUP BY TO_CHAR(t.trandate,'YYYY-MM')
ORDER BY TO_CHAR(t.trandate,'YYYY-MM')

SELECT
  v.entityid AS vendor,
  COUNT(DISTINCT t.id) AS bill_count,
  ROUND(SUM(ABS(t.foreigntotal)), 2) AS total_billed
FROM transaction t
JOIN vendor v ON t.entity = v.id
WHERE t.type='VendBill' AND t.posting='T'
  AND t.trandate BETWEEN TO_DATE('2026-01-01','YYYY-MM-DD') AND TO_DATE('2026-08-15','YYYY-MM-DD')
GROUP BY v.entityid
ORDER BY SUM(ABS(t.foreigntotal)) DESC
FETCH FIRST 10 ROWS ONLY

-- Departments (9 active)
SELECT d.id, d.name, d.fullname, d.isinactive FROM department d ORDER BY d.fullname

-- Cost accounts (98 active COGS/Expense/OthExpense; note: acctname is
-- NOT_EXPOSED to SuiteQL in this account — use fullname)
SELECT a.id, a.acctnumber, a.fullname, a.accttype
FROM account a
WHERE a.accttype IN ('Expense','OthExpense','COGS')
  AND (a.isinactive='F' OR a.isinactive IS NULL)
ORDER BY a.accttype, a.acctnumber

Known limitations

• Department analysis is limited by the 97.3% attribution gap — cost-center conclusions rest on account-level classification instead.
• The July 2026 rent posting (~$142K) is unclassified pending drill-down; both "including" and "excluding" views are given where it materially changes a conclusion.
• Headcount data was not joined; labor-per-FTE ratios are out of scope for this pass but recommended once department coding improves.
• Savings ranges are planning estimates, not commitments; each carries an owner-level validation step in §7.