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How Manufacturers Balance Cash Flow and Materials

Manufacturers of all types are facing increased demands from their clients. Whether it is ductwork for HVAC installations, specialized electronics, widgets, or finished products for general consumer use, production expenses are on the rise. Manufacturers need a robust cash flow to purchase raw materials, acquire or maintain equipment, and hire employees to ensure operations run smoothly. When clients are settling accounts at intervals of 30 days or longer, this can disrupt the normal workflow for manufacturers. Fortunately, there is a simple solution.

Filling Customer Orders

Many manufacturers receive orders at a faster rate than they are paid by their customers. On the surface, this is not bad. Making a lot of sales or taking on long-term clients is very good, and can potentially position a manufacturing company for growth very quickly. The issue arises with the rate at which revenue comes into the company. The standard business practice is to issue invoices with to customers with staggered schedules ranging from 30 to 90 days. If revenue is trickling in every month or so, that can place a strain on finances, resulting in the inability to purchase materials or worse – not making payroll. In many cases, manufacturers will turn to short-term loans, but even that is not a wise solution for a recurring issue. Taking on debt and impacting business credit ratings can land manufacturers in a much tighter financial situation, especially if there are other cash flow issues.

A Debt-Free Solution for Manufacturers

Manufacturers need to achieve greater parity between orders placed and payments on invoices. To do this, manufacturers use accounts receivable factoring. Accounts receivable factoring allows manufacturers to submit unpaid invoices, or even parts of invoices, and have them converted to cash within 24 hours. This eliminates the long waiting period created by staggered payment schedules. Additionally, manufacturers can improve cash flow, reduce the need for debt-based financing, and accumulate the capital necessary to take on large and unexpected orders. Materials, equipment, payroll, and more can easily be covered without experiencing a strain on finances.

At New Century Financial, we specialize in accounts receivable factoring for manufacturers of all types. Contact our offices today to get started.