Why Accounts Receivable Automation for Manufacturing Is a Must-Have

76% of manufacturers spend a moderate or significant amount of time chasing late payments. 

That’s according to our 2026 Cash Flow Clarity Report, and it’s indicative of a larger trend: an accounts receivable (AR) environment in B2B manufacturing that’s complex and having trouble keeping up with cash flow demands. Large orders, extended credit terms, multi-SKU complexity, and deep enterprise resource planning (ERP) dependencies often slow down payments and make it difficult to stay proactive. 

Despite these complexities, many finance teams in the manufacturing sector still aren’t fully tapping accounts receivable automation to take control of their processes, improve the customer experience, and drive efficiency.

High upfront material costs, long cash conversion cycles, and thin margins are normal in manufacturing today. To keep operations on track, confidence in cash flow is critical. Yet manufacturers face multiple challenges that make meeting those objectives difficult.  

Our data shows that 54% of manufacturers experience friction when trying to track invoice status and customer communications. And 76% are spending a moderate or significant amount of time every week chasing down late payments. Trends like these are byproducts of the complex invoicing environment manufacturers face, which include: 

• Multiple SKUs and services
• Change orders, shipments, and deposits to track
• Multi-tiered distribution networks involving distributors, wholesalers, and resellers
• High-volume transactions, with extended credit terms and long payment cycles 

All of these factors together can slow down cash flow and create bottlenecks in the invoice to cash process. For many manufacturing businesses, seasonal fluctuations also add to payment inconsistencies and make cash flow even more difficult to predict.

With data living across spreadsheets, ERPs, and email threads, finance teams often waste time searching for the information they need. Without a single source of truth to reference, these data silos can also lead to poor cross-departmental communication and create payment reconciliation delays. Re-entering data across systems can lead to invoicing errors, including duplications and discrepancies between purchase orders and invoices.  

All of this slows down payments and cash inflows, tightening working capital further. It also makes it difficult to access the data necessary to forecast cash flow accurately and promptly to anticipate trends.   

Finally, disconnected data, or a lack of access to trustworthy data, can also be a barrier to technology innovations like AR automation, which can add efficiencies to accounts receivable processes. This is evident in our survey results, where 42% name integration complexity with their ERP as a top barrier preventing faster adoption of accounts receivable automation.  

The thin margins, long cash conversion cycles, and complex supply chains in manufacturing make visibility into the invoice to cash cycle especially important. A lack of predictable cash flow, especially in critical periods of production, can stall supplier payments and delay the shipment of materials and equipment, bringing the entire production line to a halt. 

Yet many manufacturers lack visibility into when their customers will pay them. Cash flow can be unpredictable for a variety of reasons: 

• Extended credit terms and large orders increase the risk of late payments and cash flow bottlenecks.
• Invoice disputes, returns, and approval-chain delays are common, dragging out days sales outstanding (DSO).
• The global complexities introduced by international customers, currency fluctuations, and regulatory requirements add uncertainty to payments.
• Seasonality and inconsistent payment timing make it hard to forecast and plan for working capital needs. 

Together, these challenges compound the data disconnects described earlier, creating unpredictable payment timing that can strain customer relationships, slow down orders, and put future cash flow at risk through emergency loans that add further financial burden. 

Those same data disconnects also make it difficult to stay on top of aging accounts in real time, or to use historical customer data to prioritize collections by risk of non-payment. It also makes it difficult to apply payments and reconcile accounts—an area of friction for 45% of manufacturers.

Many manufacturers still rely largely on manual processes for receivables functions like collections, cash application, and reconciliation. As teams try to keep up with receivables needs without automated workflows to rely on, this opens up operational inefficiencies and vulnerabilities—from lost revenue and investment opportunities, to liability exposure and fissures in supplier relationships. 

For example, when finance teams don’t have access to automated collections management software, they’re unable to use artificial intelligence (AI) to prioritize their collections efforts, identify the highest value accounts, or predict which customers are likely to pay and when. With only manual spreadsheet-based collections in place, they lose the opportunity to be proactive—instead taking on a more reactive role that means calling customers only when they move beyond past-due. 

Reconciling payments manually can also be a cause of concern. Errors, omissions, and duplication are common when entering data manually, and can lead to delays that increase DSO and—when payments are misapplied—expand the chance of customer disputes. Automation and AI tools can also make it easier to detect duplicate payments and potential fraud concerns. 

As a whole, manual processes like these can negatively impact cash inflows, leading to missed investment opportunities. There’s also little time left to spend on strategic decision-making when the team is focused on manually managing the needs of a complicated invoicing environment.

These challenges together can put production at risk for manufacturers. When cash flow stalls, timelines get missed, shipments get delayed, and preventative maintenance gets put off. Our data supports that, with 77% of manufacturers saying that unexpected AR issues force them to adjust key strategic decisions. 

The current receivables environment can impact manufacturers in other ways as well—demonstrating a need for a new approach.

Our data shows that 86% of finance leaders lose confidence in cash flow forecasts when they stretch beyond 60 days—6% more than across all industries. 

With tighter working capital, planning becomes constrained faster for manufacturers in the face of cash flow uncertainty. Finance teams can’t optimize their working capital to cover fluctuations like changing raw material and inventory costs. 

Yet the limited visibility and data gaps we saw earlier make cash flow forecasting unreliable, hindering access to the information finance teams need to confidently look ahead. Connecting data sources and automating receivables, on the other hand, helps automate reconciliation, speed up the collections cycle, and provide real-time visibility into the status of customer payments—creating more reliable cash flow forecasting. 

Consider Laticrete as an example. A manufacturer of high-performance tile and stone installation systems, the company increased working capital through automation, putting more cash on hand and reducing their bank revolver by $7 million on average. In July 2024, after automating AR, they reached 116% of their cash flow forecast for the month—$5 million higher than any previous month.

A reliance on manual accounts receivable processes means many manufacturers lack online payment portals or the means to accept automated digital payment methods. Only 52% of the manufacturers we surveyed accept all forms of payment, including electronic, in an automated way. 

This makes it difficult to offer a variety of digital payment options, even as demand for those payment alternatives continues to grow. For instance, 42% of manufacturers have seen a shift toward their customers making—or requesting to make—card and virtual card payments. That’s a particularly large gap from the 21% that reported the same shift across the total survey population, demonstrating how urgent this need is in manufacturing.

Our data shows that 56% of manufacturers see resolving disputes or errors as their top AR friction point. It’s another area where manufacturing outpaces survey respondents across industries, where only 47% (across other industries) named this as a top area of friction. 

This shows that a poor customer experience is of particular concern within manufacturing, where a single disputed invoice can freeze working capital and cause costly disruptions to production lines. Without the automation capabilities of a collections management software, manufacturing businesses often experience invoice disputes, higher administrative costs, and unreliable cash flow forecasting.

The best AR automation software for manufacturing offers the infrastructure finance teams need to modernize their accounts receivable environment, reduce manual labor, and gain confidence in their cash flow. And finance leaders already know this: 

• 86% expect AR automation to reduce their DSO by 4+ days within 12 months
• 55% expect AR automation to lead to annual cash or cost benefits of $1 million or more 

By implementing accounts receivable automation, finance teams in manufacturing can simplify the invoice to cash process, remove friction from the customer experience, and create a single source of truth that enhances visibility into receivables. 

The best AR automation software does this for manufacturing through: 

• Automated billing that lets customers view, pay, and manage their invoices through an online payment portal, enabling better transparency and customer communications, while giving manufacturers the flexibility to easily offer new digital payment methods.
• ERP-native integrations that connect data infrastructures and let teams work from a single source of truth, enhancing cross-departmental collaboration and helping to build more reliable cash flow forecasts.
• Real-time payment tracking that gives manufacturers stronger visibility into payments, enables more precise forecasting, and helps receivables teams better understand customer behavior.
• Automated collections management software that lets manufacturing businesses prioritize collections activities based on business impact, so that finance teams can focus on high-value activities rather than repetitive tasks. 

Built for how manufacturers sell, Versapay’s unified AR automation software supports high-volume orders, complex billing, and multi-tiered distributors—letting businesses spend 50% less time managing receivables while achieving 25% faster payments.