Too many manufacturers are still in the dark about exisiting opportunities to boost cashflow. RSM Australia national leader Manufacturing Services, Jessica Olivier outlines the options already in the marketplace.
Payment terms are ballooning, capital costs are rising, and many manufacturers are struggling to access finance – but there are levers available to help navigate a difficult environment and opportunities to improve cashflow.
Food and beverage manufacturers are feeling cashflow pressures due to high inflation and interest rates, and also due to fewer investors and less access to capital.
Another issue is the government removed temporary tax benefits (temporary full expensing measures/write offs) for asset purchases at 30 June 2023, so now manufacturers have to depreciate over a number of years.
Beyond this, the important thing is for manufacturers to be aware of funding opportunities – because there is still government money out there, it’s just a matter of understanding how to apply and best use it.
That said, it is a concern that a number of government funding programs, including the Export Market Development Grant and the Entrepreneurs’ Program (incorporating the Accelerating Commercialisation Grant), have been halted, with replacement funding details still to be announced.
We also don’t have detail on how the $15 billion National Reconstruction Fund will be spent. Until the first funding guidance announcements are made, expected by the end of 2023, manufacturers are in a period of uncertainty about government funding.
What’s out there?
Australia’s R&D program is accessed by about 13,000 companies each year, and expenditure should continue to get federal government support. We have a good R&D incentive program but there’s still an overwhelming lack of awareness in the broader manufacturing community about government incentive and grant programs.
In food and beverage, we are seeing strong growth in (and government support for) digitalisation, robotics, and green technology to enhance food supply chains – this is also evident in R&D and grant applications.
But it can be a lot more work to access grants – they are very competitive (and can take a long time to be awarded), whereas the R&D incentive program is basically self-assessed.
If you’re doing eligible R&D you’re entitled to claim – too many manufacturers don’t take advantage of this. Hundreds of thousands of them don’t know the program exists, or don’t understand how to access it. We make sure clients are aware of the opportunity as R&D incentives are a great way to boost cashflow.
Until the first funding guidance announcements are made, expected by the end of 2023, manufacturers are in a period of uncertainty about government funding.
But there is still money out there. One of our clients recently got $1 for every $2 matched funding from the Victorian government for advanced manufacturing so certainly there’s still some success stories, you just need to know how to navigate those programs.
We are in the middle of a round of New South Wales grant applications for clients after it was put on hold with the change of state government, so certainly there’s frustration that time and effort has been spent in preparing grant applications that are now on hold or not available anymore.
Investing money in AI opportunities is also a way for manufacturers to seek funding for sustainability projects.
We’re seeing Australian manufacturers implement AI tech in terms of understanding their client base, being more productive, and increasing output. AI, robotics, and automation is certainly an area of focus, that’s where our manufacturing clients are spending their money, around greener tech and ESG.
For example, we have a large steel manufacturing client who is working on reducing their waste and using waste materials in other products rather than sending them to landfill. There are huge government levies on landfill so this is a big area of focus for them – to reduce costs and find new profit areas.
We believe the NRF will be a massive boost for Australian manufacturing. It remains to be seen where the funds will be directed and how it will operate (will grants be reduced? Will there be a move towards government loans for business?).
In the long run it should be positive, but I get a sense talking to manufacturers that it’s moving too slowly for them. There’s frustration. We are constantly asked whether there’s grant money they can access right now.
Jessica Olivier is partner, R&D Tax and Government Incentives, and national leader – Manufacturing Services at RSM Australia, one of Australia’s leading professional services firms.
This article also appears in our upcoming October/November print magazine.
