When considering a large purchase for your business, there are many things to be considered; below, you can see some hints and tips from Love Finance.
Don’t look at an investment in isolation - look at it as just a part of the whole business. How does it affect productivity, flexibility, costs, cash flow, bottlenecks, quality, profitability, overtime, and pricing?
If you are going to increase monthly outgoings by investing, look for opportunities to reduce monthly cash outflow from other areas by restructuring existing borrowings or consolidating your debts. Review all existing direct debits and change timings to suit your cash flow.
Make sure your money is spent on areas that provide the best return or savings. Look at all departments and decide where the money is best spent. Some of the less expensive investments can make the most significant difference.
Look at connectivity. Will money spent in one area enhance production from other equipment in the factory? Make more of the processes that can be linked with less operator intervention.
Do you respect customers that buy on price alone? No, then make sure you don’t. Look at the bigger picture, service and support, numbers and coverage of engineers, excess stock, reliability, operator training, warranties, service contracts, after-sales service, productivity, flexibility, make ready
Keep up to date with technology, working practices and new processes. Read journals, go to exhibitions, look at competitors. Companies often only research when actually investing and therefore are letting only their environment and not the whole market drive their knowledge.
Produce regular management information and make sure you understand your financial accounts. Compare them to previous years and competitors. Don’t be afraid to ask your advisors to explain debtor-creditor ratios, gearing, forecasts, depreciation, and return on capital. An accountant does not need to understand how his brochure is printed. But a printer does need to have a reasonable understanding of how his company is performing financially.
Once every year, your bankers will review your account, especially if you have borrowings with them. Your paper supplier will do the same, even if it is covertly. Once a year, you should look at them. Are they giving you the support you need? Are they competitive? Look at all of your suppliers and look for improvements or savings.
Look at your debtors, who owe you money, is their work regular, is their work profitable, do they pay promptly, later payers can be tolerated if the work is profitable, they can’t if it not. Are your debtors insured? Do you always get difficult jobs, and the cream goes elsewhere on price?
If you are looking to fund a purchase, check out first what terms could be made available - how much deposit you might need, how long you finance the equipment over. What would the monthly cost be? Do the benefits of the investment justify the monthly commitment? Remember that new equipment can often be financed over a more extended period and might require a lower monthly payment than short-term funding on a second-hand machine.
A business loan can be a great option to help grow your business. Visit our blog for information on applying for a UK business loan, rates, start-up business loans and much more.
Here at Love Finance, we give you access to several different finance and leasing options; for more information, please call us on 0800 086 9404 and speak to one of our business finance experts.
More readings
