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Article, Finance and Accounting, Manufacturing, Viewpoint

Manufacturers could unlock financial flexibility to succeed in uncertain times

By Craig Naylor-Smith, Parseq’s managing director.  

The health of the UK’s manufacturing industry has always been an important economic bellwether. It’s a major employer, and particularly affected by the international trading landscape thanks to its reliance on export markets and raw materials from overseas. It’s no surprise then that the latest figures from the Confederation of British Industry (CBI) have attracted attention. In the last three months manufacturing export growth has slowed to its weakest level since October 2017.

This drop is evidence of an uneven economic and political climate and the challenge manufacturers are currently dealing with when trying to plan for the future. The fall in the price of sterling may have made UK manufacturers’ products more attractive internationally, but it has also increased their costs. The unclear nature of the UK’s post-Brexit relationships, scatter gun US foreign policy and a fluctuating Chinese economy are but a few of the headwinds that could see that balance, and the conditions manufacturers have to operate in, shift again. In this environment, it is essential that UK manufacturers are able to be financially flexible. They need liquidity to overcome financial pressure points and take advantage of lucrative growth opportunities at short notice.

Creating efficiencies that boost cashflow

Saying this, prioritising liquidity is difficult when the sector is also changing rapidly to meet the demands of a more digital, technologically driven world. The need to invest in next generation technology, heralded by the emergence of Industry 4.0 and the Internet of Things, for example, means firms need to regularly dedicate a significant amount of capital to the procurement and maintenance of new equipment. To sustain momentum, manufacturers need to look at their existing systems to create efficiencies that boost cashflow. The good news is new technology can also help manufacturers achieve this in a targeted, cost effective way – with automated Invoice Processing (IP) in the back office being one such innovation.

Automated IP captures, encodes and validates invoices in both paper and electronic formats, automatically matching them against purchase orders without the need for manual processes. It reduces operational costs, but also improves the accuracy, speed and quality of the back office as a whole. Ultimately this efficiency will help manufacturers get paid faster and prioritise generating the liquidity they need to navigate fluctuating trading environments and continue to invest in new ways of working. Now, the implementation of automated IP also requires upfront investment, which is why manufacturers exploring new technology like automated IP should work with a partner with the right experience and expertise. They will be able to advise on a cost-effective solution that complements existing systems and provide support through the entire lifecycle of the project.

Generating liquidity to thrive

Putting the potential impact of immediate challenges, such as Brexit, to one side, the environment manufacturers are operating will undoubtedly continue to evolve. If the sector is going to remain a cornerstone of the UK economy, industry leaders need to look at every part of their operations to generate efficiencies and the liquidity they need to thrive.

Originally published in Manufacturing Management. 

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