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One reality of manufacturing is the focus on margins and metrics. Whether you’re measuring operational equipment effectiveness, repeatability or inventory loss, the quest to save costs and maximize efficiency never ends.

Top cash flow challenges in manufacturing

For all the scrutiny that the production floor and logistics receives, it’s easy to overlook the unique back-office struggles that are common to manufacturing-based businesses. As a manufacturer, keeping cash flow in balance is an ongoing challenge.

Here’s a look at the top challenges:

Extending more flexible payment terms

Giving customers leeway with invoice payments is seen as a sign of goodwill, especially when many industries are struggling to get by during COVID-19. Even so, it’s more important than ever to be vigilant for signs of trouble and respond accordingly.

Paying off investments

Investing in new equipment might have made excellent business sense on paper 12, 24 or 48 months ago. But when economic conditions change, that can leave you struggling with fluctuating demand. That puts even more pressure on your cash, making it difficult to meet requirements for loans and leases on machinery, equipment and facilities.

Getting control of accounts receivable

Accounts receivable is one of your most valuable assets. When the billing cycle stretches out into 30, 60 or 90 days, that diminishes the value of the company’s earnings.

Increased reliance on credit 

In the manufacturing space, access to credit is critical. A revolving line of credit covers inventory, labor, facility costs and more, so the goods can roll off the line and into the semi-trailers … and so your company can get paid. However, when an antiquated cash management system is also slowing access to funds, you’re undermining your profits.  

      • Adding days or even weeks to your billing cycle means a greater reliance on credit, and the result is higher interest costs. 
      • Utilization of credit diminishes profits, along with your opportunity to invest back into the company. 

Bottom line, waiting for payment means having less money to earn interest and investment income. 

Get paid faster to improve cash flow

The first step in increasing cash flow is processing payments more quickly, especially when many accounts still pay with paper checks. When you add up all the steps — mail delivery, receiving, dropping off the checks at the bank, check float — paper checks extend your already stretched-out billing cycles. Increase your access to funds with cash management tools available at your community bank.  

    • Automatic clearing house (ACH) is an electronic payment that transfers funds from the customer’s account, depositing it directly into the business account. 
    • Remote deposit capture (RDC) is a sophisticated check-scanning tool that collects the data from the document and initiates the transfer of funds from their account to yours.   

Either tool will export the data right into your accounting software. Not only would you get access to funds more quickly, but you would also spend less time on labor-intensive data entry and reconciling. 

Minnwest Bank places financial tools at your fingertips 

Set up a meeting with the cash management team at Minnwest Bank. We’ll talk about your business needs and goals so you’ll have access to financial tools to help you become a master of cash flow, capture more cash and optimize your back-office processes. 

Business online banking

This cash management tool offered by Minnwest Bank lets you manage every facet of the company’s finances. Each team member with financial responsibility can use business online banking to manage transactions and gain oversight of the finances. Business online banking gives you access to things like: 

    • Online wires 
    • ACH origination 
    • Positive Pay 
    • Account reconciliation 

Consolidated accounts at a glance

Increase oversight and give financial leaders and owners the tools to monitor the liquidity of their business in a single place. 

Get streamlined and safe with Minnwest Bank’s cash management system tools. Talk to one of our helpful cash management specialists in your community to learn how you can start doing more with your money

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