We've created this page to help manufacturers who we currently work with and who we hope to work with in the future solve basic problems using our knowledge and experience as a guide.
James Johnson, CPA.CITP, MBA, CGMA
Consulting Managing Member
Top problems we hear from manufacturing companies are listed below. Do any of them sound familiar? Click on each to explore the issue from our vantage point.
- Slow or no cash flow
- Running out of inventory
- Slow or obsolete inventory
- Low margins on products sold
- High rate of rework/quality issues
- Ballooning line of credit that's never quite paid off
- Aging equipment with low budgets for repair and replacement
You need solutions, not short term bandages.
What if the problem wasn't the line of credit, but the information you have about what's causing the line of credit to swell? You may think it's a bad interest rate at the bank. That may be true, but that may not be the reason you've ran out of funds to borrow for materials .
In most cases the reason the line of credit is growing is because there's not enough information about what orders, jobs, or customers are profitable vs. what orders, jobs, or customers are not profitable. In other words, you've unknowingly operated unprofitably. For various accounting reasons it doesn't always show up on the profit and loss statement.
Long term, sustainable solutions in your business all revolve around choosing the right numbers to track, created a completed feedback loop to management, and using that feedback look to judge management's decisions. For example figuring out how many leads you need to close one order would ensure you set the right targets for your sales team. Knowing what run rates you need on an assembly line and proper staffing would be other numbers to track. Finally forecasting and comparing cash flow through your operating accounts is another number to track.
