In the machinery manufacturing industry, due to the characteristics of the industry cycle, the realization of the order payment collection often takes more than half a year or even more time, and the vast majority of the receipt type can be briefly described as a few major categories for the advance payment, arrival payment, initial inspection payment, final inspection payment, warranty payment and other five parts, very few cash transactions. And from market research of products, receiving orders to after-sales service, any step is intertwined with the cash flow of the enterprise. The effective degree of cash flow management determines the survival and future development of the enterprise, so cash flow is the enterprise’s financing, investment and profit distribution of the link, lubricant, is the power source of enterprise production and operation.

  Analysis of the problems of cash flow management in machinery manufacturing enterprises

  1. Lack of cash flow budget management system

  Machinery enterprises in the continuous development, cash flow management has become a key indicator work, but often there are still some companies do not pay attention to the cash flow of business operations, but also did not establish a scientific and effective cash flow budget management system, thus not actively involved, simply still only this is the work of the Finance Department, which also greatly restricts the development of machinery manufacturing enterprises.

  2. Do not pay attention to the cash flow management system and scientific management methods

  Cash flow management in the financial management of contemporary enterprises is an important management work is indispensable. At present, most machinery companies in the corporate governance structure is still imperfect problems, the lack of supporting cash flow management system, and can not control the state of the flow of funds in a timely manner, resulting in the implementation of scientific and reasonable means in the operation of the enterprise, thus affecting the normal operation.

  3. Problems of inventory management?c analysis

  (1) Inventory management concept is not strong

  Machinery manufacturing enterprise production is required cycle, from the preparation of the start of production to the formation of sales of this process requires the existence of various types of inventory, and is also taking up a lot of money, often this ratio in the machinery industry is also high, and greatly affect the efficiency of the use of cash in machinery manufacturing enterprises. And operators are rarely seen from the perspective of improving efficiency, but only from the perspective of asset management one-sided in the view of inventory.

  (2) The lack of good information management tools

  Machinery manufacturing enterprises accounted for a relatively large inventory, but quite a few enterprises only consider the use of financial software, but a few although on the ERP system, but consider the cost factor, and not on line production management module, which increases the difficulty of the whole process of inventory management, and communication between departments is not timely, but also exacerbated the considerable inventory in a difficult state of control.

  (3) Inventory production plan and management inventory awareness is not strong

  In the production process, although the materials are often prepared according to the BOM settings, in the actual operation process, in order to cope with part of the products with short delivery time, the production department often pre-injects more parts or even the whole product, but due to the poor inventory management awareness of the production department, only the input and negligent management of the pre-injected parts, resulting in the accumulation of more and more pre-injected parts.

  4. Analysis of the problems in credit sales business

  (1) Blind credit sales, resulting in bad debts

  In order to increase sales and expand market share, most machinery enterprises currently take credit sales of products. However, in the process of credit sales many enterprises lack an effective internal control system, and blindly sell on credit with insufficient understanding of customer credit, resulting in uncontrolled accounts receivable, and a significant proportion of accounts receivable cannot be collected for a long time, leading to bad debts.

  (2) Inappropriate performance management measures

  In the actual management of the enterprise, the timely recovery of accounts receivable is not included in the salary assessment system, which in the long run also leads to sales staff, only concerned about how to complete the sales task, and for the personal interests of commission, etc. to use a large number of credit sales, repurchase means, making a large increase in the range of accounts receivable.

  (3) Improper management of accounts receivable

  The goal of accounts receivable management is to minimize the cost of collecting accounts receivable without affecting sales revenue. Therefore, it is necessary to do a good job in all aspects of accounts receivable management, such as the formulation of credit policies, daily management and collection. However, many companies are only keen on “collecting and clearing” accounts receivable, which is an afterthought from the management point of view, i.e. inefficient and a waste of time.

  Risk management solutions for cash flow management

  Cash flow management is important to the development of enterprises, and good risk prevention measures can minimize the risk of enterprises.

  1.Improve the budget of cash flow

  The capital movement of machinery manufacturing enterprises can be divided into capital planning, allocation and application. In the long run, by preparing a cash budget of 3 to 6 months, it can keep abreast of the expected cash flow of the enterprise in a certain period of time in the future, and in the short run, by preparing a weekly cash income and expenditure plan, it can ensure the never-ending and smooth operation of the daily cash flow, so as to guarantee the normal operation of the enterprise funds in production and operation activities while the enterprise practice proves that the enterprise cash holdings are insufficient or too Therefore, it is especially important to manage the cash inflow and outflow with an effective budget so that the cash holding is close to the optimal level.

  2. Develop optimal cash flow management indicators

  In the normal operation of machinery manufacturing industry, in order to reasonably control the net cash flow of the enterprise, it is necessary to set up reasonable cash flow control indicators, and in all relevant aspects, to strictly follow the formulated cash flow indicators for production and operation. And for each time period of cash flow return, in-depth investigation and analysis of the departments that do not meet the indicators, so that cash flow management is implemented to every department of the enterprise.

  3. Improve the inventory management level of the enterprise

  (1) Material inventory classification management

  Machinery manufacturing enterprises often have a large amount of raw materials and a wide variety of materials, it is usually difficult to manage all materials regardless of the magnitude of the entire process, but it can be divided into three categories of A, B and C according to the value of the material importance. The value of A materials accounts for the largest proportion, B products are the second, and C category is the lowest. And the focus of management is often for the A category inventory, which can be reasonably arranged and controlled from the process of ordering, incoming, customs clearance, distribution aspects, and so on, and formulate an effective inventory management strategy in advance to strictly control the quantity, price and quality of this category of inventory and improve the turnover efficiency.

  (2) Improve the accuracy of procurement plan

  In the process of enterprise production management, purchasing personnel should actively understand the status of material inventory and determine the demand for purchasing according to the demand plan minus the current inventory, and should analyze the production cycle and delivery cycle of relevant products and arrival time to reasonably estimate the procurement lead time. When the delivery is delayed, the procurement plan should be changed in time, and if the procurement plan has been implemented, we should actively cooperate with the support of suppliers to delay the delivery and payment, so as to avoid the backlog of inventory.   

   (3) Reduce the cost of holding inventory

  Machinery companies, despite the variety of inventory, can learn from the inventory strategies of some well-known companies, such as Toyota’s zero inventory, through negotiation, requiring suppliers to follow the corresponding time to deliver the needed materials to the right location, and through the ERP system to make a rapid reflection of production and demand to optimize a reasonable minimum inventory. This improves the management efficiency and delivery rate, and ultimately effectively reduces the cash outflow due to excessive funds tied up in inventory during the procurement process.

  (4) Regular inventory clearance

  In the actual production management, enterprises should always pay attention to the inventory stock level and digest the inventory as much as possible, regularly analyze the inventory aging, the long-term unusable and useless should be cleaned up in time to obtain the realization as soon as possible, so as not to avoid occupying the site and funds; and require the technical and production departments to promptly assess the corresponding inventory, whether it can be reworked and used, but also to timely update the data of pre-injected parts, timely monitoring, and Avoid duplication of materials, resulting in a backlog of inventory.

  4. Strengthen the enterprise’s credit management measures

  With the development of the market economy and the improvement of productivity, often the machinery industry in order to expand sales, and take credit sales to obtain customer orders, and for the machinery industry, often these orders are specially customized, so it is extremely important to establish the management model of credit risk in the machinery industry .

  (1) Ex-ante control of credit risk

  It should start from the credit analysis of customers, the core of credit sales is credit, the collection and analysis of customer information, management, the use of scientific methods, for credit decisions and customer credit capacity to make preparatory judgments and forecasts, and analysis to determine the credit limit and period of target customers.

  (2) Ex post management for credit sales risk

  Should confirm the contract management of signing credit sales, fulfillment, standardization, binding the behavior of both sides of the purchase and sale, and management of the choice of settlement is also?d an important part of the risk management of sales, after the analysis of the target customer to take different credit rating credit management, often the credit rating is low, can use a conservative 3-3-2-2 model, that is, the customer in the order, should follow for the collection of 30% of the purchase price, when the goods When the goods are shipped, then 30% of the payment is collected, 20% of the payment is collected when the actual cost is accepted, and the remaining 20% is eventually recovered according to the end of the shelf life of the product, which ensures that the credit sales in the machinery industry can be recycled in a timely manner, while those with a higher credit rating can use a relatively aggressive credit policy for credit sales.

  (3) Ex post management for credit sales risk

  Should focus on strengthening the ageing analysis of accounts receivable and the process of tracking, in the face of overdue accounts receivable, should consider how to complete the recovery of customer arrears at the lowest cost, and can continue to do business with the conditions, however, for the vicious delinquency, how to take the means to collect, should be measured from the effectiveness of debt collection, time, cost and other aspects.

  Therefore how scientific, operability, reasonableness of the credit sales policy can be on the machinery enterprises to save capital costs, to avoid the situation of insufficient funds.

  5. Pay attention to the management of major assets

  Machinery enterprises with significant initial investment, often in the purchase of large assets and equipment, should be carefully evaluated, whether the company can obtain the necessary minimum compensation, reduce the occupation of funds, and timely disposal of obsolete equipment, revitalization of funds, while idle equipment can be leased, revitalization of assets, increase efficiency.


  Cash flow is vital to the machinery industry, the orderly development of cash flow not only plays an increasingly important position from the financial management, but also always about the viability of the enterprise, how to enhance the management of cash flow, improve the efficiency of non-current assets will promote the overall rapid development of the enterprise.