Finance and Accounting
Four easy ways manufacturers can streamline finances
The manufacturing industry is continually dominating the business world with lots of room for growth, but financial management can give manufacturers a hard time. This is where perfectly planned financial strategies and the assistance of financial advisory service providers can help optimise business processes.
The manufacturing industry is expected to grow at a CAGR of 3.56% and is prepared to generate $15 trillion by 2024, which sets the pace for its growth. Simultaneously, improving technologies and smart manufacturing may generate $573 billion in revenue by 2027. In this blog, we will cover the financing strategies in manufacturing to optimise fiscal stability and growth.
Prominent financial challenges faced by manufacturers
Financial challenges are inevitable in the manufacturing industry as it runs on hefty turnovers. The consequent financial challenges dampen the growth of manufacturers. Here are some of the most prominent challenges to consider:
- Upfront costs
- Changing market demands
- Managing inventories
The manufacturing industry requires a large upfront investment in machinery and technologies that make manufacturing easier. Manufacturing businesses heavily rely on funds to operate, which is a bigger challenge for small to medium-sized businesses with limited financial flexibility.
Therefore, upfront investment becomes challenging for manufacturers, especially since they have to account for sizable operational costs.
Changing demands, customer preferences, and economic conditions are a few of the major challenges that every manufacturer faces. A sudden change in demand deeply affects the manufacturing operations and supply chain, which leads to inefficiency and revenue loss. The sudden demand change makes it difficult for manufacturers to analyse customer behaviour and patterns. Consequently, the procurement, supply, and inventory functions of a business often suffer.
Burdening the inventory with products could risk the manufacturers’ investments. Insufficient inventory can lead to a lack of stock, lost sales, and dissatisfied customers. To address these challenges, manufacturers must understand the demands and flow of raw materials and products and stock up using technologies like demand forecasting.
Four financial strategies for manufacturing businesses
The quest to address financial challenges could be a long one, especially since about 90% of all manufacturing industry businesses face cash flow inefficiencies owing to supply chain, debt management, and energy cost issues. Here’s how manufacturing businesses could alleviate their financial woes.
- Analyse financial statements
- Analyse profits and losses
- Monitor and create budgets
- Expense tracking in real-time
Evaluating financial statements is essential for manufacturers while formulating financial planning in the manufacturing industry. Understanding, analysing, and implementing the balance sheet data can help streamline the financial strategies in manufacturing. It also helps manufacturers make strategic financial decisions flawlessly.
Analysing profit and loss statements closely is an effective financing strategy that leads to efficient financial management. Calculate your profits and losses to determine the benefits and costs of your current manufacturing strategy. This allows you to determine how things move around and what could be tweaked to generate positive results. As a result, they act as a measuring and benchmarking method to determine business performance.
Budgeting is essential for every manufacturer and is among the most prominent financing strategies in manufacturing along the way. Establishing and managing the budgets will help follow plans of action that lead to achieving the business’s financial goals. You can create a list of budgets by breaking down your team’s work into different elements.
By proactively monitoring expenses in the manufacturing business, manufacturers gain a complete view of all financial activities and stand up to effective financial strategies. This is where automated expense management comes into the picture for end-to-end expense tracking in real time. This is an ideal financial strategy that allows manufacturers to get access to expense tracking at their fingertips and finance management made easy.
By leveraging automated expense management, manufacturers can make crucial financial decisions in less time.
How can Infosys BPM financial advisory services can help you?
Regardless of the size of a business, financial challenges cannot be overcome without proactive and innovative problem-solving. Manufacturers could ease the burden on their operations with the help of Infosys BPM financial advisory services, and optimise their finances, and minimise expenses.
