Manufacturers listen up! Harness the Cloud or quit now
For many organisations, the Cloud is still all about storage and backup. For organisations looking beyond this, the Cloud can be transformational, enabling businesses to compete effectively in a marketplace dominated by large corporations.
Why start with accounts payable?
Traditionally, manufacturers receive a large number of supplier invoices. Processing invoices manually takes a significant amount of time and resources, both human and financial. Furthermore, consistently achieving total accuracy during manual processes can be difficult, as there is always a chance of error.
This difficulty is compounded in the modern manufacturing environment, where invoices arrive in different formats from various locations. Invoices now arrive on paper, from online systems, in emails and as PDFs. Complicated manual processes can push turnaround time beyond 14 days, risking late settlement fees and missing the opportunity to benefit from early payment discounts and improved supplier relationships.
Although larger businesses statistically tend to be worse at paying invoices on time, they have the available cash and finance ability to absorb late settlement fees. This is not the case for the many organisations that have less access to reliable and consistent finance and less cash on hand to absorb charges. Effective AP management combats this problem, avoiding damaged relationships with suppliers that may refuse to make future agreements if they find a company unreliable.
The success of a manufacturing business depends on the effectiveness of production lines. Automating administrative processes frees up resources that can be utilised in other value added services, like keeping production local and reducing the need to outsource. Where production is already distributed between several global offices, invoices can be uploaded locally, processed automatically and managed at the business headquarters.
Laying the foundations of automation with AP allows an organisation to start with the core process, before extending to the entire financial process suite. Manufacturers can then automate sales order, delivery note and purchase requisition processing. Building financial suite automation in this way maximises both productivity and return on investment.
How can the Cloud help?
The Cloud is the infrastructure where an application or programme can run on many different computers simultaneously. Whilst it can refer to other types of network, Cloud computing normally refers to the Internet. In this sense, a company can provide access to software, but will store it on their central server rather than issuing the customer a physical copy. Customers can then access and use the software by connecting to the Internet and logging into the secure server. This is the Software as a Service (SaaS) model.
As software is run on the provider’s central server it is not necessary for the customer to store and run the software on their computer, freeing up the memory on the computer and increasing performance.
Using Cloud based SaaS to automate the back office AP function enables adoption of a complete solution for invoice capture and processing with minimal IT involvement or investment in additional hardware and software.
The most effective solutions will extract data from documents automatically, understanding the difference between (for example) text that is an address or company name and a purchase order number. By automating the extraction of this information, manufacturers can automatically match invoices to purchase orders and delivery notes. Where all of the relevant documents are available and the information matches, the software can process invoices for payment and securely store the information together in the Cloud.
Manufacturers are in a better position now than ever before to completely automate business processes. Historically, expensive additional hardware, software and infrastructure have been required from the outset, leaving comprehensive process automation available exclusively to large organisations. The SaaS model enables even smaller manufacturers to experience the same results without the initial investment and with an extremely fast implementation time. Within a few weeks, managers can be approving invoices externally, even away from the office.
For many organisations, moving business process automation to the Cloud will enhance security. Ensuring the levels of security and redundancy that a SaaS or Cloud service provider will have in place is extremely costly with local infrastructure. Consequently, moving from a local IT set up to a Cloud-based service can enhance security as well as drive business efficiency.
Positioning manufacturers for growth
In addition to processing invoices, managing payments, planning cash flow and maintaining supply chain fluidity, manufacturers need to ensure an effective paper trail for audit. Using Cloud functionality enables businesses to streamline finance functions and drastically reduce the time needed to ensure compliance. Cloud automations services enable businesses of any size to scan every invoice when it arrives, immediately ensuring that there is a copy securely stored online. Cloud-based invoice systems position manufacturers for growth, allowing them to take advantage of flexible resource deployment and the ability to efficiently re-scale business activity. Time savings of 75 percent for the finance functions are common, particularly for companies that have a large number of suppliers and have to process more than 5,000 invoices per year.
Invoice processing no longer takes up the valuable time of decision makers. Managers can instead focus on the small number of exceptions the software identifies. These can be approved from anywhere: on a smartphone, PC or tablet. Rather than having to spend valuable office time processing piles of invoices, managers are free to grow the business, improve supplier relationships and compete with the best in the marketplace.
Research conducted by ReadSoft found 77 percent of manufacturers believed growth was being held back by manual sales order processing, with 61 percent of companies still receiving paper sales orders that need to be processed manually. By automating the core AP process, organisations are positioned for growth through technology. It is then a clear and simple step towards sales order automation and a reduction of 42 percent in the delay of sales order fulfilment time.
IMF: Variants Can Still Hurt Manufacturing Recovery
After a year of on-and-off manufacturing in the US, UK, and the eurozone, demand for goods surged early last week. Factories set growth records in April and May, suppliers started to recover, and US crude hit its highest price point since pre-COVID. As vaccination efforts immunise much of the US and UK populations, manufacturers are now able to fully ramp up their supply chains. In fact, GDP growth could approach double-digits by 2022.
Now, the ISM productivity measure has surpassed the 50-point mark that separates industry expansion from contraction. Since U.S. president Biden passed his US$1.9tn stimulus package and the UK purchasing managers index (PMI) increased to 65.6, both sides of the Atlantic are facing a much-welcomed manufacturing recovery.
Lingering Concerns Over COVID
Even as Spain, France, Italy, and Germany race to catch up, and mining companies pushed the FTSE 100 index of list shares to a monthly high of 7,129, some say that UK and US markets still suffer from a lack of confidence in raw material supplies. Yes, the Dow Jones has made up its 19,173-point crash of March 2020, and MSCI’s global stock index is at an all-time high.
Yet manufacturers around the world realise that these wins will be short-lived until pandemic supply chain bottlenecks are solved. If we keep the status quo, consumers will pay the price. In April, inflation in Germany reached 2.4%, and across the EU’s 19 member countries, overall prices have increased at an unusual pace. Some ask: Is this true recovery?
IMF: Current Boom Could Falter
Even as Elon Musk tweeted about chip shortages forcing Tesla to raise its prices, UK mining demand skyrocketed; housing markets lifted; and the pound sterling gained value. The International Monetary Fund (IMF), however, cautioned that manufacturing recovery won’t last long if COVID mutates into forms our vaccinations can’t touch. Kristalina Georgieva, Washington’s IMF director, noted that fewer than 1% of African citizens have been vaccinated: “Worldwide access to vaccines offers the best hope for stopping the coronavirus pandemic, saving lives, and securing a broad-based economic recovery”.
Across the globe, manufacturing companies are keeping a watchful eye on new developments in the spread of COVID. Though US FDA officials don’t think we’ll have to “start at square one” with new vaccines, the March 2021 World Economic Outlook states that “high uncertainty” surrounds the projected 6% global growth. Continued manufacturing success will in large part depend on “the path of the pandemic, the effectiveness of policy support, and the evolution of financial conditions”.
Mathias Cormann, secretary-general of the Organisation for Economic Co-Operation and Development (OECD) concurred—without global immunisation, the estimated economic boom expected by 2025 could go kaput. “We need to...pursue an all-out effort to reach the entire world population”, Australia’s finance minister added. US$50bn to end COVID across the world, they imply, is a small investment to restart our economies.