Manufacturing and importing have always operated within tough conditions, but in recent years those difficulties have only intensified. From rising material costs to supply chain disruptions and fluctuating exchange rates, current economic conditions are squeezing margins and complicating cash flow management.
Given the volatile environment, both manufacturers and importers are understandably turning to more innovative financial solutions – like payables finance – to maintain their operational stability and sustain growth.
Every day, manufacturers and importers have to deal with economic pressures that could potentially destabilise their entire operations. The rising costs of raw materials, exacerbated by global supply chain disruptions and trade tensions, are making it more difficult for businesses to predict and manage expenses. At the same time, fluctuating exchange rates are adding a layer of unpredictability to budgeting and financial planning, especially for businesses that are heavily reliant on international suppliers.
“There’s a lot of pressure on businesses because rising costs have to go somewhere, and you can only push so much onto your customer. That’s the ultimate problem,” says Wayne Morris, Director at Fifo Capital.
These challenges are further compounded by tariffs and import duties, which only raise the financial burden on importers and can severely strain cash flow. For both manufacturers and importers, cash flow is the lifeblood that keeps production lines running and supply chains moving. However, the very nature of these sectors — with high upfront costs, extended production cycles and the unpredictability of global markets – makes cash flow management particularly difficult.
Manufacturers have to deal with large upfront costs when purchasing raw materials and machinery, as well as paying for labour. But because these costs are usually incurred long before any revenue is generated from finished products, it can put serious strain on cash flow.
“Accessing the material in the first place is a critical part, and you need to be able to pay – even offer prepayments – to secure supplies,” says Morris.
Lengthy production cycles also aren’t unusual in manufacturing, which can further exacerbate the issue. In fact, it can take months from the time raw materials are purchased until the finished products are sold and payments are received. During this period, manufacturers still need to finance their operations, often without the benefit of incoming cash flow. That makes them particularly vulnerable to liquidity shortfalls.
Importers are equally challenged by the financial demands of their industry. Fluctuating exchange rates can seriously impact the cost of imported goods, adding an element of unpredictability to budgeting. This is especially problematic when contracts are negotiated in one currency but payments are being made in another, and importers can lose out when exchange rates move unfavourably in their direction.
Tariffs and import duties add even more financial burdens, squeezing margins and making it tougher for importers to stay profitable.
“If you’re buying timber from overseas and you’re on 30-day terms once it lands here, you can use finance to bridge the additional financial stress of working internationally with suppliers,” says Morris.
Payables finance gives companies the freedom to extend payment terms with suppliers while making sure they are paid promptly, thereby maintaining good relationships without worrying about having to dip into cash reserves.
“Payables finance is crucial for maintaining liquidity in the supply chain and ensuring your critical suppliers are paid and available to provide essential components – because production doesn’t stop at the factory gates anymore,” says Morris.
Unlike traditional financing options like debtor financing or factoring, payables finance doesn’t increase debt on the balance sheet. Instead, it generates liquidity by letting businesses defer payments to suppliers, freeing up cash for other operational needs, such as purchasing raw materials. For importers, it’s a way to manage the financial strain of international transactions and negates the impact of fluctuating exchange rates and tariffs.
“For businesses in Australia to secure imports, they have had to use their own cash and change how they work with suppliers due to global demand for limited supply, enabling suppliers to dictate the payment terms,” says Morris, adding that payables finance provides a more stable alternative.
Looking to the future, payables finance is likely become even more popular as businesses look for more sophisticated financial tools. Digital financing platforms and integrated supply chain financing are expected to become increasingly important as well, with new ways for businesses to manage their cash flow and minimise their own financial risk.
For business owners, CFOs and financial decision-makers in the manufacturing and importing sectors, now is the time to explore the benefits of payables finance. Partnering with an expert like Fifo Capital means you’ll get tailored financial solutions that meet your company’s specific needs, all while boosting cash flow management and supporting your growth for the long term.
Read now: Cash-strapped business owners are finding value in payables finance
Fifo Capital empowers SMEs to optimise their working capital and put an end to cash flow problems. With Fifo’s award-winning finance solutions, you can access up to $2 million in revolving funds to supercharge growth. Beyond financing, Fifo’s expert team offers unwavering support, guiding you through common pain points such as late payments, rising inventory costs, overheads, and sales fluctuations. Take the strategic leap into sustainable finance and break free from the trap of quick fixes. Partner with Fifo to secure your business’s future. Do More. Win More. Grow More. With Fifo.
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