Manufacturers in Australia ordinarily face many common issues. But, since COVID-19 came along, these common issues have been compounded and bring the potential to buckle many manufacturers.
We take a look at six common issues Australian manufacturers are facing right now and how you can overcome them.
1. Managing (and increasing) cash flow
Managing your cash flow is crucial in any business, but if it’s not done well in the manufacturing industry, it can cause a complete halt in the production line. It’s important to have funds available to pay your business expenses (including your suppliers) on time, or you could face significant delays.
If you have found that debtors are paying slower than usual, there are ways to smooth out and improve your cash flow:
• offering your customers a discount for early payment.
• Accelerate your cash flow by utilising invoice finance. Invoice financing is a line of credit that provides funding based on outstanding invoices. You can receive up to 90% of the value of invoices upfront, which increases cash flow that can be used for operational costs or to invest in growth opportunities.
• Tightening your payment terms. For example, you could ask for a higher deposit from your customers or reduce the duration of your payment terms from 90 days to 60, 30 or 7 days. You could also cut off credit for any overdue customers.
• Managing your expenses more effectively. Aim to eliminate (or at least reduce) any non-essential business expenses. You should also analyse and streamline your business processes as much as possible to make them more efficient.
• Expanding your customer base. If you only have a few large customers, your business is at risk if you lose one of those customers for any reason. Diversifying your customer base lowers your cash flow risk.
2. Coping with COVID-19 lockdowns
COVID-19 lockdowns have impacted many manufacturing businesses in Australia. Some areas — such as Sydney and Melbourne — have been more harshly affected than others, as have manufacturers of non-essential products in these locations. For many, the lockdowns have reduced their ability to manufacture goods, which means income has been severely impacted over a period where other day-to-day expenses have not ceased.
Affected manufacturing businesses should access all Federal and State government financial support that is relevant and available to them. Different support packages have different eligibility requirements. While the support payments often don’t adequately cover the costs of lockdown, it could be the support you need to make it through.
3. Supply Chain Delays
Supply chain disruption has been rife due to the COVID-19 restrictions in place both locally and around the world.
This has forced many to re-think their supply chains and, in some cases, to use local alternatives where possible. While local suppliers are sometimes more expensive than international suppliers, supporting local businesses is a great way to boost the Australian economy.
If possible, try to find a variety of suppliers, so you have something to fall back on if your usual supplier gets stuck.
4. Ensuring a COVID-safe workplace
COVID-19 has resulted in a range of workplace health and safety measures being put in place. These measures vary among industries, but common ones in all sectors (including manufacturing) are to ensure the following:
- safe physical (social) distancing.
- Physical hygiene via the use of hand sanitisers.
- Regular cleaning of common surfaces.
Undertaking a risk assessment of your workplace is a great way to ensure everyone on site is as safe as they can be. Having a smooth-flowing, efficient, and safe workplace means the work can flow as seamlessly as possible.
5. Co-ordinating staff
Administrative support staff in many manufacturing organisations have relocated to work from home during COVID-19 restrictions. Many factory floor staff in manufacturing organisations have not. This has required organisations to review their communication and protocols to continue to operate as efficiently as possible while digitising their business.
While having staff working remotely can pose a logistical nightmare, it comes with many benefits too; working from home removes the need to commute and can provide flexible working arrangements. These two factors alone can significantly boost productivity. Embracing the use of video conferencing tools and cloud-based project management tools can help you effectively manage remote work for admin staff. If you need to upgrade your technology to allow for remote work where possible, our equipment finance could be the solution you’re looking for.
6. Coping with increased competition and automation
We live in an increasingly global and automated world. Manufacturers are facing increased competition, especially in the area of the automation of manufacturing tasks. Automation is streamlining manufacturing processes and increasing productivity.
Automation doesn’t mean replacing human workers; it exists to simplify procedures to take care of menial tasks so the human workers can use their time more productively. It’s crucial to be aware of what your competition is doing and to embrace the efficiencies of manufacturing automation to remain competitive.
While technology and equipment to facilitate automation could be a significant investment, the increased efficiency and output will be sure to make up for it. Consider equipment finance to cover the costs of automation.
How Earlypay can help
We specialise in providing invoice and equipment finance for the manufacturing industry. If you’re looking to upgrade equipment, expand your offering, or simply need to better manage your cash flow, we can help.
If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].