Order To Cash

Curing The $2.4T Manufacturing Sector’s Cash-Flow Crunch

The U.S. manufacturing sector, valued at approximately $2.4 trillion, accounts for an estimated 11 percent of the national gross domestic product (GDP). However, U.S. manufacturing has encountered significant damage recently over the ongoing trade war with China. In fact, the U.S. Federal Reserve said the sector entered a “technical recession” earlier this year.

Smooth cash-flow operations will be essential for manufacturers to successfully navigate a challenging economic period. Among the tools that promise to help manufacturers strengthen their cash-flow operations are order-to-cash (O2C) solutions that quickly deliver payments to manufacturers, as well as provide greater transparency, data and payment flexibility to distributors on the other end of the transactions.

The new Innovating Order To Cash Playbook: Putting Manufacturers And Distributors In Control Of Their Cash Flows, a collaboration between PYMNTS and MSTS, delves into how O2C solutions are being used in the manufacturing space. The inaugural edition explores how O2C tools are helping manufacturers strengthen relationships with distributors and end buyers by enabling a more seamless payments and receivables experience, and integrating with manufacturers’ internal systems, including customer relationship management (CRM), enterprise resource planning (ERP) and point of sale (POS), among others.

Understanding O2C Upgrades

The Playbook highlights the various frictions that manufacturers and distributors can experience in the onboarding process. When buyers are onboarded, their payment expectations are included, with sellers assessing how and when each one will get paid. Buyers and other end users expect seamless payment experiences, putting pressure on manufacturers to provide an experience that meets all parties’ expectations.

Digital O2C solutions can address many of these onboarding frictions, enabling manufacturers to quickly and seamlessly input data and terms without the risk of errors that can occur during manual entry. These integrations can spare manufacturers from several common underwriting and credit challenges, and improve their working capital, enabling these businesses to devote more time and resources to expansion efforts. They can also reduce the rate of days sales outstanding (DSO) and late payments.

O2C solutions can benefit distributors as well. With O2C solutions in place, distributors can gain greater transparency and better understanding of their purchasing capabilities. These solutions can also provide insights to help distributors ensure timely deliveries, and improve buyer relationships.

Among the new solutions helping manufacturers, distributors and buyers to keep their cash-flow operations running smoothly is Credit-as-a-Service (CaaS), providing lines of credit and automated accounts receivable (AR) processes to users. Having CaaS solutions in place allows manufacturers to pursue expansion efforts by paying those manufacturers seamlessly within the agreed upon payment terms. These solutions can also free manufacturers from manual tasks, such as collecting payments and matching invoices with purchase order numbers.

Distributor Rocket Industrial On Easing Cash-Flow Pains

Issues with cash flow can put a wrench in a business’ operations. This makes having the right cash-receivable solutions in place a must for distributors. Packaging solutions and distribution firm Rocket Industrial is using O2C solutions to ensure timely payments from its clients, which include Fortune 500 companies and smaller firms, the latter of which sometimes need financing assistance to make purchases.

In the Playbook’s feature story, Traci Leffel, Rocket Industrial’s director of finance, tells PYMNTS how O2C solutions can offer distributors peace of mind when addressing the different payment needs of various clients.

A Financial Compass For Landscapers

The global landscaping market also stands to benefit from more effective O2C tools. Landscaping companies frequently face cash-flow issues related to delayed payments. These issues can have a ripple effect in the market, preventing contractors from buying the materials necessary to complete a job, leading to interruptions and further delays in the completion of a landscaping project.

The Playbook includes a use case of a North American landscaping product supplier that used O2C tools to focus on its work, and avoid the uncomfortable position of collecting outstanding funds from contractors. To better understand the new role of O2C, download the Playbook.

About The Playbook

The Innovating Order To Cash Playbook, a collaboration between PYMNTS and MSTS, explores how order-to-cash (O2C) solutions can be integrated with various business systems, including receivables, CRM, eCommerce, ERP and POS, among other systems. This edition of the Playbook focuses on how O2C solutions can be put to use in the manufacturing space, and improve cash-flow operations for manufacturers, distributors and end buyers.

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Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.

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