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Finding hidden cash

As the mining industry works to tighten its belt, business performance consultancy Partners in Performance advises companies to search for savings.

Finding hidden cash

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The need to unearth alternative cash flows has become more crucial  for companies as mining investment continues to decline, according to consultancy firm Partners in Performance. “On the whole, I don’t think the mining industry has focused on managing its cash for 10 to 13 years,” Partners in Performance founder and chief executive Skipp Williamson said.“A number of corporations have beaten the drum of ‘growth at any cost’ and that leads to a lot of hidden costs.” Williamson said productivity shouldn’t be a focus reserved solely for periods of downturn but should be a long-term goal.

“Productivity shouldn’t be a term that is only used at the bottom of the cycle,” she said. “There is nothing else in mining, you buy assets and then focus on productivity. Essentially, it should still be productivity at all stages in the cycle.” Williamson said there were three levers that could be pulled to reveal hidden cash from within a business, the first being the reduction of working capital. “There are two parts to the reduction of working capital,” she explained. “One is paying your suppliers later and the other is getting your customers to pay you on time. It’s about actively managing your cash so that it is in your pocket rather than someone else’s.”The second lever is all about releasing cash from the supply chain. “This is about managing every stage of the process tighter to remove excess inventory from the system,” Williamson said, adding that the final lever was the reduction of operational costs.

However, while these short-term fixes will fill your pocket for a while, they don’t solve any long-term problems.“The first levers you pull tend to be short-term, one-off things – you stop spending money, you defer spend, you squeeze your suppliers,” Williamson said.“However, that doesn’t actually create anything fundamentally different in your business. You need to realise you have still got to fundamentally improve the business’s productivity. “Use fewer trucks to get the same tonnage out or fix the maintenance problems so you don’t have to spend so much money on repairs, for example. “You still have to address the fundamentals, what we call root cause problem solving, because that is what actually shifts your cost base.” Williamson also advised caution when making these changes to ensure they weren’t inadvertently detrimental.“We are seeing a fair amount of budget slashing without solving the underlying problem and that just lands you with more costs further down the line when everything comes crashing down,” she added.