A CEO I worked with last year, running an ₹80 crore precision components business, called me one afternoon, genuinely confused.
He said, “Shrikant, we’ve had the best six months of orders in our company’s history. But I don’t know where the money is.”
His bank account was tighter than it had been two years ago, when sales were half of what they are today.
More orders. Less cash.
That’s not a revenue problem. That’s an operational problem that most manufacturing CEOs don’t see coming until it’s already arrived.
Hi, I’m Shrikant Prabhudesai.
I work with CEOs of manufacturing businesses to improve delivery performance, reduce costs, and bring discipline into how their operations run. So that when the business grows, it doesn’t quietly start eating itself from the inside.
Today I want to talk about something I’ve observed across multiple factories. Three early warning signs that your business is moving toward a cash crunch. Not a market downturn. Not bad customers. Signs that are already present, right inside your own operations.
Sign Number One. Your inventory is growing, but your output isn’t.
I visited a factory about eighteen months ago. Mid-sized. Sheet metal fabrication. The owner was proud of his stores. He had raw material stocked for almost ninety days. He called it “security.”
When I walked the shop floor, I noticed something. Three out of eight machines were idle before lunch. Not because of a breakdown. Because the specific material needed for those jobs, a particular grade of steel, wasn’t available. Everything else was there in abundance.
What had happened was this. The purchase team was buying based on habit and vendor relationships, not based on what the production schedule actually needed. So capital was sitting in the wrong materials, while the right materials were in the back-order.
The owner thought he had an inventory problem. He actually had a planning problem.
When your inventory value keeps rising quarter on quarter, but your dispatch numbers aren’t keeping pace, that’s the first sign. Cash is converting into material, but material is not converting back into cash. And that gap is silently suffocating your working capital.
Sign Number Two. Your on-time delivery is slipping, and you’ve started accepting it.
This one is subtle, because it doesn’t feel like a financial problem. It feels like an operations headache.
A business owner I was working with, automotive ancillary, about ₹120 crore turnover, told me his delivery performance was “around 70 percent.” He said it with a slight shrug, like it was just the nature of the industry.
I asked him what it cost him to service the 30 percent that was late. He hadn’t calculated it. When we sat down and looked, the picture was uncomfortable.
Late deliveries meant expedited freight, sometimes three to four times the normal cost. It meant his production team was constantly reprioritizing, which meant set-up times were increasing, which meant even more delays on other orders. And critically, three of his larger customers had quietly shifted a portion of their business to a competitor. Not with a complaint. Just quietly.
The revenue impact of those three customers shifting even 20 percent of their wallet elsewhere was more than ₹8 crore annually.
When delivery performance drops, most CEOs look at the operations team. But the financial consequence, the hidden cost of firefighting, the lost wallet share, the freight premiums, that’s a cash drain that doesn’t show up clearly on any single line of your P&L.
If your on-time delivery has been under 80 percent for more than two quarters, and you’ve stopped treating it as urgent, that’s the second warning sign.
Sign Number Three. Your production planning is reactive, not forward-looking.
This is probably the most common pattern I see.
The factory is running. Machines are busy. People are working hard. But if you ask the production manager, “What does the next three weeks look like?” the honest answer is often, “We’ll figure it out as orders come in.”
There was a company I spent time with, industrial equipment, ₹200 crore range, where the MD told me they had a planning system. And they did. On paper. But on the ground, what was actually happening was that the loudest customer got the next production slot. Whoever called the sales team and escalated, their job went to the front of the queue.
The result was this. Long-running jobs with better margins kept getting interrupted. Every interruption meant a changeover. Every changeover was time and cost. The shorter, louder jobs were getting done on time, but the business was spending significantly more per unit of output than it should have.
And because margins on the disrupted jobs were getting quietly eroded by this firefighting, the profit that should have been turning into cash wasn’t materializing.
Reactive planning looks like a scheduling issue. But what it actually does is inflate your cost of production and reduce the margin that eventually becomes your cash.
These three signs, inventory misalignment, slipping delivery performance, and reactive production planning, they rarely appear as financial alarms on a dashboard.
They show up as operational noise. As problems the team is “handling.” As something that’s always been there.
But if you look at any manufacturing business that hit a serious cash crunch, and I’ve seen a few, you’ll almost always find that one or more of these patterns had been present for six to twelve months before the crisis arrived.
The business was growing. The orders were there. But the operations were quietly converting less and less of that revenue into actual cash.
The question worth sitting with is this.
In your factory right now, is cash moving through your operations, or is it getting stuck somewhere along the way?
Because the answer to that question is rarely found in the finance department.
It’s found on the shop floor.
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