For manufacturing companies, preparing a budget is essential to maintain profitability and protect cash flow. As well as providing a reference point for financial performance, an accurate budget helps business leaders to set realistic prices, increase efficiency, and strategically plan for growth.
The challenges facing manufacturing and engineering businesses, however, are different from other types of industry. For example, manufacturers often have high working capital commitments, such as raw materials and completed products: excess stock can interfere with cash flow but too little can lengthen lead times and stifle growth. So, how can budgeting software enable manufacturing businesses to remain competitive and profitable?
1. Better Accuracy
Corporate budgeting software eliminates the element of guesswork that is inevitable with a manual approach that uses historic data in Excel spreadsheets. With a dedicated software solution, you will be able to access current, reliable data, which will improve your ability to manage your company’s finances, particularly working capital, cash flow, and labour costs. With a more incisive understanding of your business’s financial position and forecasts, you will be less likely to overinvest or underinvest in working capital commitments, so cash flow will be more consistent and predictable.
2. Decreased Risk
Ambitious business leaders are often applauded for their willingness to take risks, but it is important that strategic decisions are grounded in real-time data and accurate forecasts instead of supposition and guesswork. Manufacturing budgeting software allows you to create credible business models so you can make informed financial decisions based on reliable data-driven forecasts – something that simply is not possible with poorly modelled and error-prone spreadsheets.
3. Optimised Performance
Efficiency in manufacturing is vital to ensure that production schedules are completed as quickly as possible and for the most competitive price. With an ad hoc or spreadsheet approach to budgeting, it is difficult to identify the most inefficient areas in your business, whereas budgeting software will provide you with a more insightful and ongoing impression of your operations so that you can focus on optimising weaker elements to increase efficiency and productivity.
4. More Efficient Use Of Time
Setting an accurate budget takes time and diligence, but it also requires easy access to the latest financial data, market trends, and forecasts. Typically, many larger companies take up to three months to set and approve their budget for the new financial year, particularly if they rely on out-of-date or rarely updated spreadsheets to compile business data. With budgeting and forecasting software, you can save considerable time by eliminating the manual data input and analysis that is an unavoidable part of spreadsheet-based financial management and reducing the budget cycle to four to six weeks. If you simply need to re-forecast, this can often be completed in as little as one afternoon.
5. Improved Cashflow Management
Finally, efficient cash flow management is essential for manufacturing companies to remain competitive in times of economic uncertainty and to invest for growth. By improving access to reliable financial data and eliminating errors, budgeting software can help your manufacturing business to manage its cash flow more effectively, so you can make better-informed decisions that strengthen your presence in the marketplace and invest when the time is right.
Find Out More
To learn how you could manage your business’s financial situation more adeptly and make better informed strategic decisions, please download our free Corporate Planner Finance Guide or call Account-Ability on 01242 578966.
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