Article by Andrew Mamonitis, Vice President – APAC, Manufacturing Division, ECI Solutions
Are you expecting FY2026 to be a bumper year or a tough 12 months struggling to turn a profit?
Unfortunately, for many Australian businesses, it’s more likely to be the latter. Conditions have been challenging for a while now and there’s been a corresponding surge in insolvencies. More than 7400 Australian companies had entered external administration by 31 December 2024 – a 47 per cent increase on the previous year’s figures, according to ASIC data.
Notable casualties from the manufacturing sector included Queensland battery producer Redflow Energy, which collapsed in August 2024. Early 2025 saw the country’s only architectural glass producer, Oceania Glass, go down the same unfortunate path – a victim of cheap imports and rising costs.
These are challenges small and medium-sized manufacturers will continue to grapple with in FY2026, along with sluggish demand and stubborn skills shortages. And then there’s energy availability and cost, a major concern for manufacturers around the country as electricity and gas prices continue to head north.
Concentrating on cash flow
Against this gloomy backdrop, it’s important your enterprise stays ‘fighting fit’ financially. That means keeping an eagle eye on your cash flow, day in, day out, and doing everything in your power to ensure it’s as healthy as possible.
Fail to do so and a sudden change in circumstances – a regular order that doesn’t come through on time, say, or a customer that’s slower than usual to settle their invoice – could result in you struggling to pay your own staff and bills.
Accessing external funding in the form of an overdraft, invoice financing facility or business loan to tide you over (assuming your bank is willing to come to the party!), means you’ll be up for additional borrowing costs which you may not have budgeted for.
The fact is, poor cash flow management can be much more than just an expensive headache. It’s an existential threat, one which is responsible for more than 82 per cent of business failures globally, according to one US study.
The opportunity cost of slow cash flow
Not having sufficient cash at hand won’t only put your manufacturing business in a perilous position financially.
It could also hamper your growth by making it harder for you to pursue new business opportunities that could potentially result in profitable growth.
If you’re not in the position to be able to purchase additional inventory, acquire new plant and equipment or hire an extra pair of hands or several, diversifying your range or accepting a larger than usual order may not be feasible.
Understanding your position
Cash flow difficulties are often made worse by lack of visibility.
Without accurate, up-to-date data on how your business is tracking financially, it’s impossible to know how well or badly things are going, right here, right now.
And without those insights, you’ll be unable to implement strategies to improve your financial position by getting vital funds flowing in faster.
This is precisely where many small and medium sized Australian manufacturers are at in 2025: their financial data is stored across disconnected systems and spreadsheets, rather than being channelled into an easily accessible ‘single source of truth’.
Tools to make the task easy
That’s where cloud-based enterprise resource planning (ERP) software has a vital role to play.
Abandoning manual and semi-manual accounting processes and migrating all your financial data to a single solution – one that’s been developed with the unique requirements of the manufacturing industry in mind – can help you get a solid understanding of your cash flow.
Choose a solution that can generate a cash flow report based on historic data and you’ll have a true indication of how your business will be travelling financially a few weeks hence. It’s likely to prove far more accurate than any cash flow report generated by your traditional accounting system. That’s because the latter will be based on credit terms, which are not always an accurate reflection of debtors’ payment patterns.
Harnessing the power of AI-powered analytics technology will enable you to identify emerging issues and take decisive action to course correct, if your organisation looks like it’s heading for a cash flow crunch.
You’ll also be able to make better business development decisions, secure in the knowledge that the strategies you choose to pursue are financially viable.
Building the solid foundation your manufacturing business needs to succeed
Times have never been trickier for Australian manufacturers and maintaining healthy cash flow can mean the difference between sinking and swimming.
If you’re committed to ensuring your business is around for the long haul, ERP technology that enables you to monitor and protect your financial position is an investment you can’t afford not to make.
The content of this article is based on information supplied by the author. This information is general in nature and has been prepared without taking your personal/ professional/business objectives, circumstances and needs into account. You should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice. Consider the terms and conditions for the product before making any decision.
