The Australian manufacturing industry faces numerous challenges, many of which have been exacerbated by recent global events, from labour shortages and fluctuating raw material prices, to natural disasters, including bush fires and floods. These compounded issues, if not addressed, have the potential to overwhelm many manufacturers. We explore common problems currently facing Australian manufacturers and provide practical strategies to overcome them.
1. Managing 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 your customers are paying slower than usual, there are ways to smooth out and improve your cash flow:
- Offering your customers a discount for early payment, or a penalty for late payment.
- Accelerate your cash flow with 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. Essentially, you get early access to cash while your customers are free to pay according to your invoice terms.
- 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. It can also be helpful to 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. Supply Chain Delays
Supply chain disruption has been an ongoing concern for the past few years.
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.
To help smooth out the cash flow associated with your supply chain, trade finance is worth exploring as a flexible and practical way to support your business. By providing finance to pay your suppliers up-front, it gives your business the opportunity to take on larger orders, new customers and, ultimately, to improve your sales. You can pay suppliers earlier, which can help unlock forward pricing discounts and can strengthen relationships with this aspect of your supply chain.
3. Poor demand forecasting
If manufacturers do not have adequate reporting systems to predict demand and future sales accurately, they may be unable to fulfil orders, resulting in customer dissatisfaction and lower revenue. Poor demand forecasting affects budgeting, finance, production capacity and inventory management. Predictive analysis of consumer data, using advanced tools and software, helps businesses accurately forecast demand and improve the product lifecycle from the factory to the consumer.
4. Coping with increased competition and automation
We live in an increasingly global and automated world with manufacturers facing more competition, especially in the area of the automation of manufacturing tasks. Automation helps improve manufacturing processes to increase 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 help cover the costs of new technology and automation.
How Earlypay can help
We specialise in providing invoice, trade 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.
To understand how our business finance solutions could work for you, simply submit our enquiry form, and our friendly team will be in touch!
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].