Manufacturing Cash Flow Challenges: Invoicing

[dot_recommends] November 3, 2021 Manufacturing Business Strategy

Three Invoicing Practices that Improve Cash Flow

Manufacturing Cash Flow Challenges are one reason for increased digitalization of accounting functions (92.5% currently digitizing), invoicing (60.8% currently digitizing), payments processing (51.0% currently digitizing), and payment tracking (47.8% currently digitizing)

 

With all the economic challenges, our manufacturing partners have been seeing more late payments and unpaid invoices.  Extended credit lines and delayed payment due dates benefit customers. Unfortunately, these accommodations make manufacturing cash flow challenges worse.

I’m seeing manufacturers pressured to extend payment dates out beyond 30 days to 60 or even 90 days. That’s a long time to carry debt on the books.

Balancing Customers’ Credit Demands and Cash Flow

Manufacturers feel stuck between two competing goals:

  • Maintain goodwill with customers
  • Protect your own financial integrity

What if you don’t have to choose?

Here’s how some companies are nurturing customer relationships while managing manufacturing cash flow challenges.

How Manufacturers Encourage Customers to Pay Invoices on Time

1. Prioritize sending invoices right away

Companies we work with are increasingly embracing digital invoicing.  When you automate invoice sending, you free employees to focus on customer relationship building.

2. Incentivize on time or early payment

Using incentives for early payment may feel friendlier than late payment penalties. Still, you can only carry debt for so long. Penalties may be necessary, depending on your customers’ payment behaviors. Whatever you choose, communicate it well!

  • Offer early payment incentives
  • Consider penalizing late payment
  • Communicate options clearly and frequently
  • Avoid surprising your customers

 

3. Follow up regularly on outstanding credit

Companies keeping on top of invoicing need a skilled representative managing accounts receivable. A detail-oriented staff member with great people skills will nurture customer relationships while protecting your cash flow status.

I hope these ideas help you sort through any cash flow challenges you may be facing. And, as always, I invite you to reach out with your own solutions. Connect with us on LinkedIn or Tweet us. We’re always happy to talk.

–parin
Managing Partner

Image credit: Versapay.com

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