Automating AP Processes Takes the Bottleneck out of Manufacturing Supply Chains

Tags: Manufacturing, Supply Chain

The manufacturing industry has its roots intertwined with one of the biggest advances in the history of modern civilization – the Industrial Revolution. The manufacturing process was dramatically transformed, seemingly overnight, from a labor intensive, manual process to one that utilized machines in order to exponentially increase the production of goods.

More recently, the manufacturing industry is advancing to the next level with the Industrial Internet of Things (IIoT), which incorporates wireless connectivity into networked devices and sensors that are used on manufacturing floors and throughout supply chain checkpoints. Used this way, the IIoT is transforming traditional supply chains from linear ones into interconnected, optimized digital supply networks that are once again revolutionizing the way manufacturers conduct business.

It would stand to reason that an industry which sparked these cutting-edge advances would carry that innovative thinking to all of its functions. However, when it comes to back-office processes, that isn’t always the case. For instance, the accounts payable (AP) process for many manufacturers is still bogged down with paper-based payment schemes that rely on AP teams to manually handle payments including keying in data, printing checks, and routing them for approval and finally posting.

Aside from the fact that this is an inefficient way to process payments, a manual process is also prone to potential errors, late payments and fraud exposure. In an industry where maintaining a healthy supply chain is crucial to preventing business interruption, paying suppliers on time and in their preferred format can make a huge impact when it comes to strengthening those relationships and ensuring a continuous stream of necessary supplies and equipment. That’s why so manufacturers are working to reduce costs across the organization and drive greater efficiencies.

Nearly 50% of businesses admit that at least 1 in 10 payments to suppliers goes out late1, leading to increased processing costs as well as added stress on supplier relationships. Additionally, 61% of companies cite rising supply chain management costs as their number one challenge2, making it clear that a revolution of back office processes is as important as it is to production processes.

Fortunately, the supply chain damage created by manual payment processes can be solved by automating key AP functions and moving away from a paper-based payables system to an electronic one.

The transition to payment automation may seem like a daunting task, but with the right partner, the integration can be seamless. The preferred solution allows your AP department to leverage existing accounting systems and bank relationships to make timely and secure electronic payments to the vendors in your supply chain. Suppliers will benefit from the convenience of electronic payments—whether by virtual card which can often bring earlier payment terms or ACH which deposits funds directly into bank accounts. This saves both manufacturers and suppliers the time and costs associated with manual paper check processing.

Another important point to consider if you’re going to pay suppliers electronically is the ability to provide detailed remittance data in suppliers’ preferred formats, such as CTX, a custom AR file, or email. This ensures that suppliers can easily apply the cash associated with an electronic payment as soon as it is received. In addition, detailed reporting enables your AP staff and your suppliers’ AR staff to gain better visibility into payments status.

Transitioning to electronic payments also helps combat the ever increasing threat of fraud. A sophisticated electronic payment partner will have built-in monitoring that can identify threats and stop unauthorized movement of funds or illicit access to sensitive data, protecting the business and supply chain alike. It will also verify and maintain supplier bank information and take the burden off of manufacturers by storing that data securely.

If your company is being pressured to lower supply chain management costs, remain competitive with suppliers and protect your business from fraudsters – it’s time to abandon those eighteenth century paper checks and revolutionize your AP processes by transitioning to electronic payments. Consider it a well-placed investment in the next Revolution.






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