126-year old Barbour, a British fashion brand famous for its wax jackets and country fashion, is targeting the manufacture of 23,000 gowns over three weeks.
LVMH, parent company to Dior, Givenchy and Guerlain, turned its perfume factories into hand sanitizer plants.
Japanese electronics giant Sharp has adapted existing clean-room production facilities for LCD display panels to make 150,000 surgical masks a day.
This is what’s happening in the manufacturing world today.
And it’s pretty amazing. Many businesses are going through a reinvention phase right now - the market dynamics and buying behaviors have changed drastically. Businesses across all industries are scrambling to understand what’s next for their survival.
The companies who have been able to pivot to making face masks, ventilators, gowns, Covid-19 test kits and other supplies in need during the pandemic have found a way to get through the next two months while they assess the next few years.
A product pivot leads to some additional AR challenges for manufacturers, but a little bit of awareness and a smart system to support you can ensure smooth sailing. And even if you haven’t changed products, these are important considerations for managing your cash flow in difficult times.
Pay careful attention to credit
When you’re building products for a customer, you rely on their ability to pay. However, a sloppy credit assessment and management process is going to cost you. A lot. It can be time consuming and challenging to determine the credit-worthiness of your prospects, but it’s critical to your success. Too many poor credit customers result in slow cash flow, high collections costs and sometimes unmarketable products in your warehouse.
If you’ve changed your production to meet Covid-19 needs, then you’re likely onboarding customers from different industries or markets than you’ve previously served. This may make their credit profiles different from what you’re accustomed to assessing. While time is of the essence, taking your time to understand their credit profile in context of their business is well worth your effort.
Consider flexible payment terms
Customers who are credit worthy are also often savvy and looking for the best possible payment terms. Your traditional ERP and accounting software doesn’t provide the flexibility you require to be competitive with pricing structures and terms, which means your prospective customers will turn elsewhere for a better - and faster - customer experience. Invest in an AR system that gives you the flexibility to offer creative payment options to meet today’s demands.
For existing customers of your current products, who may be struggling in today’s economic freeze, flexible payment terms may be just what’s required to keep the relationship afloat for a while. At least with flexible terms, there is still cash moving through the business, while providing a bit of breathing room for a worthwhile customer.
A more flexible payments offering and smarter collections together can increase your speed of payment up to 34%. That’s one third faster, resulting in a healthier cash flow, increased working capital and reduced revenue leakage.
It’s really all about collections
This is the key to cash flow for all manufacturers, regardless of whether we’re in a pandemic. Since manufacturers are often producing goods with either none or only partial payment, there’s often a ‘cash gap’ in the business.
That can be hard to sustain if your AR systems lack transparency and if your communications tools are limited. Inefficiency in collections is not only costing you cash flow and working capital, but often providing a negative customer experience that will have your customers taking their business elsewhere.
Speeding up collections is often the most effective and simplest way to reduce the cash gap. A few ways to encourage customers to pay invoices include:
- A robust communications program that alerts customers to when invoices are due or past due
- A self-service portal so customers can pay on their own schedule, not just during your business hours
- Offering “early-bird” discounts to customers that pay within 10 or 20 days
- Flexible payment plans that meet the customers business model and needs
Just as you’re reevaluating your options for manufacturing product, now is the time to re-evaluate your AR process and ensure you have the right tools in place. By carefully assessing credit with new prospects, providing flexible payment options to new and existing customers, and ensuring a tight, consistent collections process, you are putting all the key pillars in place for improving your working capital.
We have both incredible hardship and incredible transformations happening in manufacturing right now. Keeping your cash flow moving with smart AR solutions is smart business.
YayPay offers smart tools for smart AR
YayPay’s one platform, one system, one code base solution automates the entire accounts receivable process, from credit to cash application. Leveraging automated tools and communications, customers see a 3x increase in productivity. YayPay’s solution easily integrates with accounting, ERP, billing, and CRM applications for improved transparency, ensuring customer and payment information is accurate for AR and collections teams. Our proprietary predictive analytics engine identifies credit risk and reduces the potential for revenue losses, driving smart business decisions.