The key to sustaining a high rate of growth in manufacturing
27th September 2017
Happy days are ahead for manufacturing organisations - at least, those that can keep up with all the success.
It's no secret that the Australian manufacturing industry has been booming over the past few years, but the improved sector activity can actually inflict more harm than good for unprepared businesses. Developing efficient bookkeeping habits through the incorporation of accounting software has become vital to maintaining growth in a sometimes chaotic field.
Signs pointing up
To understand where any potential issues could sprout up, it's important to first realise exactly how the manufacturing sector is doing so well. It recently received its highest rating on AI Group's Purchasing Manager Index (PMI) since 2002, at 59.8, Business Insider reported. This marks an 11 month stretch of continued gains, but not solely for reasons having to do with finances.
Most manufacturing activity is tied to inventory, rather than sales.
"Production and new orders were especially strong, but they were coupled with a robust expansion in inventories rather than in sales," the AI Group said. "This suggests current activity is geared towards future orders and stockpiling rather than for immediate delivery."
While it's excellent news that clients are seeing long-term relationships with manufacturing organisations as a viable strategy, it can also create bookkeeping issues. Accountants must be up-to-date on every outstanding balance in relation to the stocked inventory, some of which can be subject to volatile swings in currency conversion rates.
Staying in command
With the majority of manufacturers' inventory in constant flux, having a flexible accounting software system is key to managing it all. Whereas many provide rigid bookkeeping tools, growing companies should search for a platform that fits their specific business model.
The application should, for example, automate the variance of currency fluctuations in relation to committed funds. Similarly, it should offer the ability to create custom accounting periods that can map to each client's needs. As the AI Group suggested, not every order moving forward will require immediate fulfilment.
All organisations should continue looking forward towards their future, which is why the software should integrate with a business management platform as well. While the rest of the industry is focused on robotics and the Internet of Things (IoT), innovative companies are taking advantage of intuitive software ecosystems that make it easy to link inventory management with accounting and other components of the business. If they aren't integrated, transfer of data becomes rigorous when it should be seamless. Contact an Advanced Business Manager representative today for more information.
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