Manufacturers are facing a storm of operating challenges.
Global supply bottlenecks are hampering production, while rising energy prices and competition for labour are driving up input prices.
All of this will be putting pressure on firms’ working capital. Delays in production, and likely bottlenecks in the delivery of finished goods, ultimately means many businesses will have money tied-up in inventory, unfinished products, or goods in transit for longer than they’d planned.
Effectively managing cashflow through this period will be top of manufacturing management teams’ priorities.
And one, often overlooked, element that could make a significant impact to their efforts is payment allocation automation.
The benefits of automation
In the age of Industry 4.0, many manufacturers have already automated their production lines.
However, adoption has been far slower in the back office. Here, there is significant opportunity for firms to use the technology to their advantage.
Allocating payments from customers is a fundamental part of the payment process. But we still see manufacturers employing teams to allocate significant volumes of payments manually, using dated legacy systems and basic processing methods.
Manual processing increases the risk of human error. In the payment allocation process, this can cause cash to be misallocated or held in ever-growing suspense accounts, damaging a firm’s financial health by restricting cashflow.
By automating payment allocation – leveraging technologies such as optical character recognition (OCR) and intelligent character recognition (ICR) – manufacturers can almost eliminate the risk of problems associated with manual payment processing and make the process faster and more efficient, in turn reducing the likelihood of cashflow chokepoints.
In fact, using the technology available from specialist suppliers like Parseq can result in 95% of payments reaching customer accounts on day one, with 99.9% accuracy.
Cutting costs, increasing margins, supporting customer experience
Leaving technology to pick-up the repetitive work of the allocation process also frees up team members’ time for more business-critical, or more profitable, tasks.
And, by driving cost efficiencies, automation can help lower manufacturers’ administration costs, in turn supporting margins and ultimately bolstering a healthier bottom line.
Not only can the technology help get more done, faster, it also helps avoid the additional costs of tracing payments where errors occur.
But the benefits go beyond cashflow.
Regular misallocation of payments can strain relationships by making customer interactions wrongly focussed on following up what are thought to be outstanding payments, even when these have been paid.
While the customer experience considerations within the business-to-business landscape differ from those of direct-to-consumer, buyers will only have a limited appetite for errors, which will take up their own resource in terms of their finance and administration team’s time.
Avoiding this will help reduce the chance of reputational damage from poor customer experiences, and support buyer relationships, along with retention.
The road ahead
The economic landscape ahead for manufacturers is uncertain.
Currently, inflationary pressures are expected to persist – at least in the immediate term – and it’s important that firms are doing all they can to secure their financial position and reduce known risk now.
As they do so, it’s essential that they don’t overlook the potential of payment allocation automation.
Having automation in place can bolster critical cash flow, while simultaneously freeing-up staff time and supporting buyer relationships.
Originally published in Manufacturing Management