It’s important for manufacturing businesses to understand, and then act on, the opportunities available for them to improve their cashflow.
Payment terms are ballooning, capital costs are rising and many manufacturers are struggling to access finance – but there are levers available to help them navigate a difficult environment, according to RSM Australia’s national leader manufacturing services, Jessica Olivier.
“With cashflow issues rife across the sector, to improve cashflow many manufacturers are automating processes, renegotiating payment terms and looking at better equipment and production processes.
“Beyond this, the important thing is for manufacturers to be aware of funding opportunities - because there is still government money out there, it’s just a matter of understanding how to apply for that finance and how best to use it,” Ms Olivier said.
Grants, contracts and R&D money available
A number of government funding programs, including the Export Market Development Grant and the Entrepreneurs’ Program (incorporating the Accelerating Commercialisation Grant) have been halted, with replacement funding details still to be announced.
“That’s a concern, that funding was pulled back in the May budget and we don’t know yet where those funds will be redirected.”
“Beyond the priority areas outlined with the announcement of the National Reconstruction Fund, we don’t have detail on how that $15 billion will be spent. It’s no wonder many manufacturers are unaware of or are confused about options to boost cashflow and capacity.”
She said Australia’s R&D program is accessed by about 13,000 companies each year, and R&D expenditure should continue to get Federal Government support.
“Australia is competitive; we have a good R&D incentive program but there’s still an overwhelming lack of awareness in the broader manufacturing community about government incentive and grant programs."
Ms Olivier said it can be a lot more work to access grants - they are very competitive (and can take a long time to be awarded), whereas the R&D incentive program is basically self-assessed.
“If you’re doing eligible R&D you’re entitled to claim – too many manufacturers don’t take advantage of this. Hundreds of thousands of them don’t know the program exists, or don’t understand how to access it. We make sure clients are aware of the opportunity as R&D incentives are a great way to boost cashflow.”
She has noticed a recent trend towards manufacturers putting their R&D monies to environmental, social, and governance (ESG) work, which aligns with the Federal Budget’s clean and green priorities.
NRF holds hope – once details are clear
Until the first funding guidance announcements are made, expected by the end of 2023, manufacturers are in a period of uncertainty about government funding.
“I've been saying to my clients there’s still money out there, still really good incentives. One of our clients recently got $1 for every $2 matched funding from the Victorian government for advanced manufacturing so certainly there’s still some success stories, you just need to know how to navigate those programs,” Ms Olivier said.
“We are in the middle of a round of NSW grant applications for clients after that was put on hold with the change of government in NSW, so certainly there’s frustration that time and effort has been spent in preparing grant applications that are now on hold or not available anymore.
“We believe the NRF will be a massive boost for Australian manufacturing. It remains to be seen where the funds will be directed and how it will operate (will grants be reduced? Will there be a move towards government loans for business?).
“In the long run it should be positive, but I get a sense talking to manufacturers that it’s moving too slowly for them. There’s frustration. We are constantly asked whether there’s grant money they can access right now.
Ms Olivier said investing money in AI opportunities was a way for manufacturers to seek funding for sustainability projects.
“We’re seeing Australian manufacturers implement AI tech in terms of understanding their client base, being more productive and increasing output. AI, robotics and automation is certainly an area of focus, that’s where our manufacturing clients are spending their money, around greener tech and ESG.
“For example, we have a large steel manufacturing client who is working on reducing their waste and using waste materials in other products rather than sending them to landfill. There are huge government levies on landfill so this is a big area of focus for them – to reduce costs and find new profit areas.”
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