Conquer the crunch

Recent surveys indicate that UK manufacturing expects the credit crunch to weaken worldwide consumer and corporate demand — which could mean a tough year ahead.

This country's manufacturing has weathered similar storms before and is well placed to deal with most issues arising from this latest crisis. But senior management willl need to keep a strong and consistent focus on the financial fundamentals if their business is to survive.

Five key principles will help manufacturers ensure their finances are in the right shape to withstand any problems arising from a more volatile economic climate.

First, stay alert and respond quickly to early warning signs. Maintain constant contact with customers, suppliers and advisers, and make sure that you respond to warning signals coming from your customer and key suppliers — and understand what those signals might mean.

Businesses may need to ask themselves a few questions. Are prompt-paying customers becoming late payers? Are suppliers requesting advances in payment terms? Are there rumours that a customer or supplier has business or contract problems? Are credit rating agencies sending worrying messages? These unusual trends might indicate problems, and understanding these issues will help develop appropriate responses and contingency plans. Panic is not required — but a strategy might be.