Manufacturers are no different from any other type of business. They need to manage their cash flow properly if they are going to keep the company afloat. The global pandemic has only added to the stresses that owners and managers have faced recently. They are competing against other manufacturers at home and worldwide and the cost of raw materials is continuing to increase, making it more challenging to keep costs under control. Customers continue to expect high-quality products at a reasonable price. Manufacturing accounting must be a priority if the goal is to control costs and boost cash flow.
How Accounting Software Increases Cash Flow for Manufacturers
Here are some ways you can use your accounting software to boost your cash flow to ensure your manufacturing business stays in the black.
- Send invoices out immediately.
If your business is taking orders for goods, then you need to issue invoices. There is nothing forward about sending them out. The faster they reach your customers, the quicker your company will receive the payment. Your accounting software will help your team stay on top of invoicing and sending them out promptly.
- Deliver invoices electronically.
Send your invoices to clients by email. Alternatively, let your manufacturing accounting software notify your customers an invoice is ready for viewing. The customer can then log into your system to view the invoice.
Taking these steps means the customer receives the invoice more quickly. Your business also saves the cost of printing off invoices and mailing them out.
- Offer discounts to customers who pay early.
Your invoices may be due 30 days from the invoice date. Give customers an incentive to pay early by giving them a discount if they pay within the first seven days. Your business may have to settle for 10-15% less than the amount on the invoice, but you get the benefit of having the money in hand sooner. This is much better for your cash flow.
- Examine production costs to find more efficient ways to manage cash flow.
This tip is more than just going through all the production costs in your manufacturing business and simply cutting them by a certain percentage across the board. It’s important to be smart about your spending so the quality of the products being produced is not affected.
- Don’t commit to spending until it is necessary.
When the goal is to keep spending down, consider whether an expense is something that must be incurred at present. If it is a necessary expense, consider whether there is a more economical option.
- Consider leasing equipment instead of buying it.
Leasing equipment has some distinct advantages over buying it outright. You avoid the carrying costs associated with taking out a loan. If the equipment needs regular servicing or repairs, your company is not responsible for these costs; they are covered as part of the lease agreement.
SYSPRO Is the Manufacturing Accounting Solution for Post-Pandemic Businesses
As the world economy moves into a post-pandemic phase, manufacturers need to find accounting software they can trust. Now is not the time to throw caution to the wind nor is it a good idea to be overly cautious. Manufacturers and distributors need to trust the tools at their disposal, including SYSPRO ERP software, and use them to continue making the best decisions for their businesses.
Would you like to find out what’s next for manufacturing CFO’s? Watch this on-demand webinar and panel discussion from SYSPRO, What’s next for Manufacturing CFOs? Priorities for 2021 and Beyond, where senior finance leaders discuss critical lessons learned from the pandemic.
To discover more about SYSPRO ERP, contact a PositiveVision software specialist at (800) 559-1323. You can also fill out our online form to request a call.