The Federal Reserve’s decision to lower interest rates this year has garnered diverse reactions from the US finance experts. Many advised caution to apparel manufacturers. Darrin Beer, Western Regional Manager, Commercial Services, CIT Group points out apparel manufacturers should ensure their accounts receivable are protected as the retail landscape can be volatile. He feels it’s important for them to ensure their business has sufficient capital to support growth and handle sales fluctuations due to seasonality, order deferments or cancellations.

The Federal Reserve’s decision to lower interest rates this year has garnered diverse reactions from the US finance experts. Many advised caution to apparel manufacturers. Darrin Beer, Western Regional Manager, Commercial Services, CIT Group points out apparel manufacturers should ensure their accounts receivable are protected as the retail landscape can be volatile. He feels it’s important for them to ensure their business has sufficient capital to support growth and handle sales fluctuations due to seasonality, order deferments or cancellations. A properly structured financing facility should provide a company with adequate borrowing flexibility to manage through any and all of these events.

Cash and inventory management

Efficient cash flow management is also something that Mark Bienstock, Managing Director, Express Trade Capital advises. As he says, watching cash flow is paramount to sustaining a profitable apparel business, both in the short and long term. The company advises clients not to buy or produce anything without underlying orders. Speculation requires significant cash-flow strains and interest costs that most companies cannot absorb.

Apparel manufacturers also need to be vigilant about their inventory management feel some experts. Managing their assets appropriately in relation to the scale of actual order activity will help manufacturers improve liquidity and reduce borrowing requirements.

New ways of cash-generation

Not just management, some experts also encourages clients to look for new ways to make money. For some, this may involve expanding with a direct-to-consumer platform where margins are more attractive, while others may target creditworthy online retailers.

According to Rob Greenspan, President and Chief Executive, Greenspan Consult, another way to increase cash flow is to focus on assets that turn into cash such as accounts receivable and inventories. Apparel manufacturers, during times of a slowing economy, need to maintain their liquidity. They need to focus on cash flow and profitability by reviewing their operating expenses and updating their sales projections and cash-flow plans.

Adopting a disciplined approach

Planning for future should always be disciplined and based on specific market-sector needs with a combination of cash reserves, needed additions to debt earmarked to support specific business-cycle (working-capital) needs and fixed-asset additions, point out experts. The ultimate goal is to negotiate extended open-supplier terms to match their trade cycle and only borrow to support growth and not for building excessive inventory levels in case they get a future order, says Ken Wengrod, Co-founder/President, FTC Commercial Corp. For this some experts recommend extending current financing agreements to take advantage of the present interest-rate environment. The combination of a supportive partner and retained capital will better prepare a company to thrive in the future.