Steve Norgrove, Innovation Manager - SME Group - WMG

Many manufacturing businesses are still working hard to keep producing essential supplies for the UK. For example, national efforts to support the fight against COVID-19, such as the Ventilator Challenge and rapid sanitising technology challenges, as well other vital products and services.

Steve Norgrove, Innovation Manager in our SME Group, has a wealth of experience in managing change. Previous positions he has held include Business Improvement Director at GKN, where he was during the 2008 financial crash. He is a firm subscriber to the idea that in a crisis, cash is king.

Here, Steve shares his thoughts on improving cash flow during difficult times.

1 Get on top of your finances

 Talk to the bank about factoring invoices if you don’t do it already

 Chase any overdue and disputed invoices

 Contact your major customers and ask for early payment on hardship grounds (there is a mutual dependency).

 Contact your material suppliers and ask if they will buy back excess and request a period of extended or phased payment terms.

2 Review your working practices

 Look at overall capacity and develop a HR strategy that enables flexibility in the workforce to meet your requirements.

 This may mean limiting overtime, scheduling flexible shift patterns and putting temporary annual leave policies in place.

3 Overhaul building management to reduce overheads

 Close off areas of the facility to save heating and lighting costs.

 Shut down anything that isn’t used and lock it out.

 Check process and paint plant heating burners are modulated and not fixed. Run plants to minimum safe temperatures overnight and at weekends.

4 Look at your equipment usage

 Consider mothballing equipment or running it, for example, once a week, to minimise cost and maximise efficiency.

 Whatever you do, don’t run everything on low utilisation, this is inefficient and will waste money.

 Compressed air is an expensive source of energy, make sure you fix any leaks and minimise use of “air-hungry” equipment.

5 Take charge of your business activities and projects

 If it doesn’t add value in the short term, then stop or suspend it.

6 Free up as much cash as you can

 Go through stocks and spares, see what you can sell. Be prepared to put things on eBay, sell for scrap, or at a limited-time “get it before it goes” style discount.

 Review rework and consider selling items as scrap rather than spending money on fixing them.

 Ensure scrap bins are sorted and segregated properly. Mixed or contaminated scrap attracts a lower price.

 Sell off old or obsolete machinery. As scrap if you have to.

 Look through the tooling and fixturing inventory and scrap anything obsolete (remember to seek customer permission first if they own it).

 Strip out redundant pipework and electrical services from the factory infrastructure – heavy-gauge copper cable, bus bars, and switchgear is particularly valuable.

7 Make changes to your business model

 Change your delivery schedules to a “milk round” strategy - don’t deliver everywhere every day.

 Review your product portfolio and identify where you make your money (there are numerous models you can use for this, the BCG Growth-Share Matrix is a useful one)

 Look at associated costs and draw up a list of what you would mothball if you have to, and when.

8 Tighten up the budget

 Throw away the current budget, set new monthly spending targets for each function and assign owners to control them.

 Screw the spending limits down – the MD should sign off every purchase order and invoice.

 Likewise for travel authorisation and expenses.

9 Shave off costs wherever possible

 Make sure everyone starts and finishes at a set time where possible - you don’t want all the lights on for one person.

 Minimise the cleaning regime (keep the loos clean, don’t dust the MD’s desk)

 Where possible, terminate leases on excess fork lift trucks, vehicles and so on.

10 Follow Government advice on staying safe ...

 And remember, WMG are here with helpful advice and will be ready to support you when normal operation resumes.

Contact the SME Team at WMG here.

We understand this is a very challenging time for businesses, and finding the information you are looking for can be difficult. We have compiled a list of useful resources here.