Cash Flow Management in Manufacturing Companies

As the world emerges from lockdown, businesses will be faced with a new challenge – one for cash. Over the last 20 years or so, the manufacturing industry has focused heavily on productivity, but we believe, following the pandemic, cash will take on an increasingly dominant role.

For the last 20 years and, certainly since the last recession, productivity has been the focus of attention. The industry has used many tools to improve productivity and reduce waste. Lean manufacturing and productivity will always be important in manufacturing. But with the industry emerging from the pandemic with large debts and loans, cash and cash flow management are going to become a key focus.

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Balancing Profit, Cash, Risk

In the globalised economy, many companies have long supply chains. The logic for this was that some countries have cheaper production costs, and so it is more profitable to buy the parts or material in a cheaper location. All of us have benefitted from goods produced in cheaper locations. However this is based on a number of factors that are changing; costs are lower in the other location, logistics are inexpensive, and the cash wrapped up in the long supply chain is cheap and available. If one or more of these factors changes then the logic for the sourcing decision can be less clear.

In our factories, we organise ourselves to produce the lowest cost parts, but we rarely consider the cash impact of the way we organise production. Does our production model lead to cash wrapped up in large raw material stores, work in progress and finished inventory? We could choose to organise our production in a manner that reduces the cash contained within our processes and leads to faster shipments and therefore payments from customers.

Cash Conversion Cycle

With the above scenarios, the decision was predominantly driven by cost. If cash becomes less available then the decisions have to be reviewed and the balance of profit and cash compared, and the risks evaluated. The Cash Conversion Cycle measures the performance of a business from investing in raw materials, through the transformation in manufacturing to the final product, to finally being delivered to the customer and payment from the customer being received. How quickly a business can convert its investment in materials to collecting the cash from its customer will be crucial.

Risk, Safety and the Environment

After the Coronavirus pandemic, companies will be forced to review their working practices and asses risk in new ways. This can mean business risk in terms of cash availability, which will be increasingly important. However, it can also mean business risk in terms of the potential outbreak of the virus, either in our own people and factories or those of our suppliers, and customers.

In our own factories, social distancing will play a continuing role and affect how we organise our workplaces and even our manufacturing model. There is increasing pressure on all companies to look at their total environmental impact. Our business risk assessments have just got a whole new consideration on top of other potential business interruptions.

A new approach focused on cash

IngPro Ltd has designed a suite of new tools to focus on cash management in a manufacturing environment. The new product is called Cashed-Up!. We're not accountants and don’t try to be. But we are experienced Manufacturing Directors and consultants who've worked through various recessions in the UK and globally. We know how crucial cash can be to the survival of a business. It's easy to say that a business must improve its cash performance, but it's the technical know-how of manufacturing, and supply chains that will enable a business to make significant improvements in its cash flow management, whilst maintaining or even improving profitability and customer satisfaction.

The start of an improvement project is establishing the current position and then agreeing the desired future status. 

The unique, new Cashed-Up! service from IngPro Ltd, starts with a Cash Dashboard, which simply and easily shows you;

• Your Cash flow forecast
• Working Capital KPIs
• Your Cash Conversion Cycle
• Your Cash Intensity Map  

Using the Cash Dashboard and focusing on what you need to achieve as a business is the basis for producing a detailed action plan, to have the best impact in the shortest possible time.

The implementation focuses on improving the whole business cash performance and highlighting where decisions have to be made between balancing cash, profit and business risk.

This consultancy is delivered remotely, to reduce risk to your teams. Improvement modules will be delivered using remote coaching, with each session lasting approximately 1 hour. This also gives you greater flexibility - you won't be tied to having consultants spending days on-site. Our experienced business coaches will support the agreed change plan remotely, delivered at a pace suitable for you.

We believe that manufacturing companies will be challenged for cash for the next 2 years at least. IngPro is the only Manufacturing Consultancy to deliver the new Cashed-Up! process focused entirely on helping your business improve its cash position.

IngPro Ltd are specialists in manufacturing. We can help you look at scenarios and develop your cash strategy and mitigate the risks associated with poor cash flow.

Enquire today for help with Cash Flow Management in your Manufacturing business.

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