U.S. Manufacturers looking to retain customers and maximize profits need to innovate their operations, including changing how they get paid.
If steps can be automated to allow teams to be more strategic, manufacturers become more efficient and reduce capital expenses. But curbing cost hikes and reducing the impact of supply chain constraints require a more modern, automated approach to invoicing and billing.
There are several steps to a B2B transaction that encompass the entire sales lifecycle, i.e., quote-to-cash. A common scenario sees manufacturers presenting an offer to a prospect, then shifting to collecting, allocating, and recording the revenue. The accounts receivable (AR) team receives the documentation and follows up on outstanding invoices for payment.
The speed it takes to pay suppliers and get paid is critical for businesses, but manual, paper-check-based processes are far too slow and inefficient. Moreover, outdated infrastructure and manual payment routines leave customer data susceptible to fraud or worse.
Automating payments takes the waiting game out of wondering how many days, weeks, or months it will take for invoices to be paid. Digital processes such as cloud-based AR automation software can accelerate payments while reducing days-sales-outstanding (DSO), which eases the strain on finance to generate a positive impact on cash flow—and lessens the account information exposure and risk of fraud from paper checks.
The AR process is a recurring schedule of accounting systems that generates outstanding invoices. From these lists, teams must figure out why certain invoices weren’t paid—something the company did or didn’t do—and determine the communication or touchpoint needed to complete the process, with the cycle constantly repeating.
Digital AR automation tools solve the problem of refreshing outstanding lists by simplifying reconciliation. All payment data flows in and out of digitally integrated systems for easy communication and payment enforcement.
Delaying payments can damage a company’s reputation, creating a perception of financial instability, lack of reliability, or distrust in a manufacturer’s ability to fulfill its obligations. This can make it difficult to secure new contracts, maintain existing relationships, and even find new suppliers. With functionality such as real-time data retrieval, invoicing, and billing, disruptions can be resolved before they compromise revenue growth and further damage a company’s reputation.
Reducing DSO and getting paid faster is critical to B2B operations. The ability to reconcile accounts faster means manufacturers have better insights and more visibility into their finances. Improved visibility into inbound and outbound payments also makes the cost of payment and associated costs more reliable.
Another benefit: faster access to working capital. This helps manufacturers get a better understanding of what funds are on-hand or available in upcoming pay periods to adjust and plan purchases more efficiently, which is especially important on a global scale where international wire transfers or checks add to the difficult, costly, and time-consuming payment reconciliation process.
Despite the obvious benefits, manufacturers tend to be at the beginning of their digital invoicing and billing journeys. Pivoting AR payment processes can increase efficiency by reducing manual errors, saving time and money by eliminating the need for paper checks or physical transactions, while improving security by reducing fraud risks.
Digital payments also can provide valuable data and insights to help make better business decisions and boost the bottom line.
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