Finance plays a critical role in any business. Manufacturing businesses are certainly no exception to this rule. If you own or operate such a company, read below for more information on the importance of finance, as well as manufacturing financing.
How Inventory Plays a Part
It is vital to strike a careful balance when determining a reasonable amount of inventory for your business. If you have too much inventory, that means you may not have the liquid cash needed to manage daily operations, as well as the cash needed to deal with emergencies. If you don’t have enough inventory on hand, you could lose business due to not having the capacity to meet the needs of your customers. In fact, inventory can be described as a tool of risk management, insuring your company against unexpected consumer demands. In some cases, manufacturing financing may be needed to boost inventory quickly.
Watching Cycle Times
It’s also wise to stay informed about your cycle times. While these may impact your business differently than the cycle times for a retail business, they still are integral to the overall process for a manufacturing company. If your cycle times increase as a result of surging business, you will need to accommodate that need and reassess that metric. This is not a bad thing, but it is a factor that can affect your bottom line if you don’t act quickly to reflect changing cycle times.
Calculating Marginal Costs
While you shouldn’t make significant changes based on fluctuating weekly or hourly production rates, you should assess fluctuations on a yearly, quarterly, and even monthly schedule. If certain resources are idle on a routine basis, this may indicate the need to take actions such as forecasting demand more effectively, implementing better quality control, and evaluating market changes.
Just as finance plays an important part in your manufacturing business, manufacturing financing can serve as a powerful risk management asset. Contact Safe Harbor Commercial Capital today, and we will help you to explore the best financing options for your company.