Managing consistent working capital provides the resources needed to achieve organizational objectives and execute on the company’s strategic vision. In this way, working capital ensures business continuity for manufacturers and acts as a determiner of success. When cash is managed properly, a manufacturer will not only have the resources needed to keep operations running on schedule but also generate the long-term capital needed for major expenses like equipment replacement and facilities upgrades.
However, in a manufacturing setting, working capital is typically harder to manage than other industries. Manufacturing has a number of oddities that complicate their working capital formula and make management more challenging. Furthermore, inventory risks, high operating costs, reliance on manual processes, and frequent payment delays can all put strain on their working capital. The result is a perfect storm of cash flow management difficulties for manufacturers.