This is the first in a series of four articles covering the cash flow issues previously raised by business owners and addressed at the follow-up Manufacturing Alliance meeting recently held in Willow Grove. This July meeting was formatted in a way that a manufacturing leader facilitated a group participation activity on a number of suggested remedies for the presented issue. The goal was to trigger conversation by way of the audience asking questions and relaying experiences, and the subject matter experts offering alternatives for each suggestion. This allowed the meeting attendees to walk away with a number of potential nuggets for use in their own organization.
The initial concern voiced by company leaders was, “How can I recognize a future cash flow problem before it actually becomes obvious?”
Manufacturing Alliance co-chairman, Bud Tyler (Vice President, EF Precision Group), 
started the conversation on this subject. “One of the biggest fears of any owner is not knowing what you don’t know! Cash flow management remains one of those mysteries because we rely on others to tell us what we should know ourselves.
Just like I use a simple scoresheet based on some old fashioned math calculations to make sure accounting is in the right ball park with our monthly P&L, I’m going to present some basic assumptions using old fashioned common sense that each owner should consider when looking at their organizations cash flow status. These are early warning signals of future issues.”
The list of highlighted early warning signals is as follows:
- When your success is going against overall industry trends
- When your RFQ’s are trending up and/or your conversion rate to orders is trending down
- When you feel you need to be the” low cost producer” in order to compete
- When you feel you can’t talk with your lenders
- When your suppliers on time delivery percentage trends down
- When you stop taking advantage of discounted terms
- When you stop requesting customer feedback
- When you feel you have to choose the “cheaper” job candidate
- When your customers force you to change the definition for “1st day outstanding” for A/R from “date invoiced” to “date received and approved.” Even worse, when they don’t tell you and just implement the change without advising you ahead of time.
Bud added that there are so many more uncovered indicators. Example, the lack of internal process improvement, rising inventory levels, and an epidemic of customers postponing orders.
However, “one of the most overlooked early warning signals is that sinking feeling that you have lost control of the business. You need to be more hands on in the day-to-day operations and that you simply cannot trust the business to run by itself.”
Unfortunately, you are the organizations biggest cash flow generator and when you are narrowly focused, one of the first consequences is diminishing cash flow numbers. At a recent manufacturers only event called “Cash Flow on Tap” in May, there was several important points raised that helped us develop the agenda for our follow up event called “Cash Flow Solutions” that took place on July 19th.
“Cash flow is the lifeline of small businesses and listening to real life tight cash flow stories and how to survive them was enlightening”
Jacques Boudin, President, Tescor Climate Control Equipment
These cash flow tidbits are just another in a series of manufacturing sharing events. The Manufacturing Alliance is based on networking and sharing. Our aim is to keep communication on a business leader-to-business leader level and supplement presented information with expert knowledge from our service provider contributors.
Our next article will be on “Top 10 Cash Flow Solution Suggestions.” The next general meeting of the Manufacturing Alliance of Bucks & Montgomery Counties will be held on Monday, September 28, in King of Prussia. Watch for details in the coming weeks. We look forward to seeing you there!