A recent study did not have good news for accounts receivable in the manufacturing industry. This study shows that, although the manufacturing industry is working hard to collect on unpaid invoices, it just isn’t going in their favor.
ReceivableSaavy released their 2015-2016 Perceptions Study Deep Dive: Payment and Remittance guide. The study looked at how businesses are getting paid, whether they offer early payments and how fast they get paid. The study further broke down the data by industry.
Unfortunately for the manufacturing industry, the study showed that a majority of manufacturers are taking over 30 days to get paid. Only 40 percent report a quick one to 30 day pay period. The manufacturing industry had the longest reported wait period of every industry, including health and medical services, distribution and financial services.
One factor that may play into why it is taking the manufacturing industry so long to get paid is the constant payment in paper checks. The manufacturing industry reported 80 percent of their client’s payments being received via paper check. Waiting to receive a paper check just isn’t practical. But this isn’t to say that the manufacturing industry hasn’t tried to rid themselves of this.
According to the study, only 17 percent of manufacturing industries reported preferring paper check as the method of payment. A whopping 74 percent of the industry preferred being paid electronically, either via ACH or credit card.
This doesn’t mean that the manufacturing industry has to hang their heads in defeat. There is a solution to getting paid faster: using an automated accounts receivable software. There are two ways the accounts receivable software can speed up payments.
First, an automated accounts receivable software will help to clear up issues with electronic payments. It will simply make it easier for clients to pay you via credit card or ACH. Although you may prefer the electronic route, that doesn’t mean you’ve made it easy for you clients to take advantage of it. With almost every aspect of our lives going digital these days, I’m sure your clients would prefer paying electronically as well, they just need it dropped in their laps to do so.
Secondly, an automated accounts receivable software will send out alerts to clients who are running behind on payments. Automated calls and emails can be scheduled to remind clients to pay. Paying via paper check is not the only reason that the manufacturing industry is seeing slow payments. Simply reminding customers that they need to pay will help to speed up the process. Furthermore, the automated accounts receivable software can flag customers that continually don’t pay on time. This way, you aren’t constantly getting in bad deals.
Although it seems that the manufacturing industry is getting the short end of the stick for collecting on invoices, there is a solution. Simply giving clients an easier way to pay electronically and reminding them often can help close the gap on days sales outstanding.