Optimism is on the rise in the manufacturing industry. This is the first year coming out of a down cycle in the economy and businesses are ready to grow, which means they are ordering, producing and shipping more product. As companies look to expand operations, hire new talent and purchase new equipment, so are those in the manufacturing industry. Manufacturers are looking for new strategies, researching their financing options and exploring ideas for better market penetration.
Here are three tips to help improve your manufacturing operations this year and potentially generate new revenue for your business.
Learn from Those Around You
Those in the manufacturing industry are always looking for ways to improve their business and learn from others. One of the best ways to do this is to attend roundtable events, guest forums or private events where manufacturers have the opportunity to talk to other companies and CEOs to brainstorm ideas and share best practices. Topics can include everything from changing phone systems or insurance, improving commission structures for sales, discussing lean manufacturing practices, exploring best hiring practices, examining international business options and more.
How Does Your Cash Flow?
Most manufacturers talk about the importance of cash flow, but not many go deep into the process and determine how to make it better. They need to be asked questions such as: How many days does it take to collect on receivables? How long are you paying on collectables? Are you getting discounts for paying early?
A lot of manufacturers are operating inefficiently. For instance, they are duplicating internal steps or creating extra steps to receive money. It costs $2 to $5 to mail a check, whereas sending an Automated Clearing House (ACH) payment costs less than $1. Businesses need to review how much time it takes to print, stuff and mail a check versus using a card or ACH payment.
Risk Management and Efficiency
When manufacturers think of risk management it may only be related to the safety of their employees on the floor. But there also is risk management that needs to be considered in a company’s financial operations, as well. Anything manufacturers can do to manage risk - from their employees’ safety to their internal operations – will ultimately benefit the bottom line. This includes having dual controls with employees, doing regular inventory checks, having different people sign off on checks and having a process to detect and deter internal and external fraud. So much risk can be diverted simply by paying attention to the small, everyday details.
Risk efficiency also is something manufacturers should review as it relates to items such as outsourcing payroll or return collections. Often times there are functions that businesses can outsource to save time and money. One of the main things to be outsourced is payroll. A payroll provider can help save a company time and money. They may also accept tax liability so the employer isn’t responsible for tax penalties.
By looking more closely at operations and taking the time to learn from others, manufacturers have the opportunity to expand and grow in areas they never knew could be improved. Any operational, cash or risk management improvement will ultimately improve a company’s bottom line and their outlook for future growth opportunities.
Sean Nohavec is senior vice president of business development at UMB Bank in Colorado. He can be reached at Sean.Nohavec@umb.com.