Artificial intelligence can improve cash flow for manufacturers

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With spread out operations and inventory investments, it is time to use new technologies to help collection

The U.S. manufacturing sector has been valued at roughly $2.4 trillion annually and accounts for 11 percent of the national gross domestic product (GDP). And every manufacturer spends a significant amount of money in different regions and warehouses to keep their businesses operating smoothly.

The idea that you manage your business for profitability but operate it for cash flow seems like a simple one, but the many moving parts compromise cash flow. This can be even more challenging for manufacturers, who must maintain inventory dispersed in multiple locations.

The answer to cash-flow issues lies in the power of artificial intelligence and analytics. By using existing data, AI can positively impact collections and improve the flow of cash in your business in multiple ways.

The most obvious is accounts payable. Normally, manufacturers rely on the invoice due date; when it passes, someone follows up. It is a reactive process. But AI can take the data the manufacturer already has and bring it together, to be more proactive.

AI-powered collections management uses data and machine learning to create a predictability measure of which customers will default or not pay. This allows a company to tune collection efforts, creating a more positive and proactive solution.

The system looks at payment history to make predictions. It can also enable custom collection actions depending on the customer or distributor. If a particular distributor requires specific paperwork for payment, the system ensures any follow up includes the proper documentation.

More personalized experiences increase the opportunity to collect in a timely manner. If a customer is frequently delinquent, reminders can begin earlier. There may be other customers who regularly miss their due date by a few days, so the system knows payment is expected soon. Patterns can help determine the right interventions, so you get paid faster.

Better inventory management also has a positive impact on cash flow. Leveraging AI and analytics, manufacturers can better predict demand and plan what to make, when, and manage overages and stock outs more efficiently.

Being more proactive with collections and inventory management means you raise the visibility of your working capital, so you can keep your business operating smoothly.

But these are not the only benefits of bringing AI and analytics into manufacturing. In my next post, I will discuss the significant savings AI can offer to manufacturer warranties and to enhance your cash flow.

Prasad Shyam is a Vice President, Insights & Data Global Practice at Capgemini. To learn more about how using data and analytics can improve business performance, contact him at prasad.shyam@capgemini.com.

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