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.