Who Decided? How much Cash is wrapped up in your business?
We devolve authority in our companies. Our businesses run in departments and teams. But there are a multitude of quite small decisions that give rise to a significant cash impact to your business.
Cash is King, and we need to be in control of all aspects of our manufacturing business that drain cash.
Government loans have been great. But they will soon disappear. It is up to us, as manufacturers, to balance our business to meet the new demands of our customers, and operate with the least cash that is practicable.
This does not mean reducing stocks to levels where customer service is impeded. It means making sure that we understand the customer's demands and are ordering, stocking, manufacturing and delivering to the customer the right product at the right time. Not re-ordering, stocking, and manufacturing products that are not needed, or for which we won’t be paid for a long time.
The decisions about what we buy, where, and under what terms are often built into our MRP systems. To handle the complexity of modern manufacturing we have automated re-order points, order quantities and who the supplier is. We have set up our manufacturing to focus on least cost. We may have given generous payment terms to our customers, and have probably tolerated payment delays too.
We may even have incentivised our staff to perform on a “least cost” model, but not taken the cash impact into account. It may be cheap to buy a product a long way away. But if I must pay in advance, on a long lead time, and large volume, I could literally be bankrupt before the goods arrive. Having a least cost model is great, provided the business can manage the cash impact. Its not an “either-or” situation. It’s a balance, that is best suited for your business model.
The impacts of a cash shortage are obvious; the need for expensive loans, inability to pay for parts needed, wages, management time wrapped up in chasing cash and parts and answering angry customers. But worst of all, not being able to expand and take advantage as markets re-open.
IngPro Ltd are manufacturing specialists. We are currently very focussed on Cash. It is the key issue to manufacturers now.
We will help you create a Cash Dashboard, understand your Cash Conversion Cycle, then start to tackle the biggest issues in your working capital and manufacturing model that are tying up cash.
See https://www.ingpro.co.uk/services/cash-management and contact us now.