Optimize Your Raw Materials Expenses With Rho
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1 minute
August 1, 2024
The costs of raw materials like steel, copper, lumber, and plastics can shift dramatically as fluctuating trade agreements, tariffs, and environmental events disrupt the global supply chain—a reality manufacturers have come to know all too well in recent years.
What has remained constant is the critical role raw materials play in manufacturing budgets. Historically, they’ve accounted for a median of 50% of the cost of goods sold for U.S. companies. That means when and how your suppliers are paid can have a big impact on your manufacturing business’s finances—not to mention your productivity and your reputation.
At Rho, we believe paying suppliers shouldn’t cost you more (in time, resources, or fees) than what’s on the invoice.
Below, we outline five ways our integrated finance solutions help you manage and even leverage your materials expenses, from boosting your cash flow and profit margins to giving you deeper insights into spending across different vendors and channels.
Control spend, boost efficiency, and earn up to 1.25% cashback with Rho.
When supply chains are in flux, you may want to stock up on raw materials to keep your operations moving. But that can mean tying up cash that you need to run your business. So, how do you strike the perfect balance between a healthy inventory and a healthy cash flow?
You can start by charging materials expenses to a smart, flexible corporate card. Look for a virtual card that you can activate instantly and assign to each recurring vendor with customized settings, limits, and terms. More vendors than ever are accepting virtual corporate cards and other digital payment methods that automate bill pay, ensuring their invoices are paid accurately and on time. One report predicts that 80% of B2B supplier payments will be made digitally by 2025.
The Rho Card lets you flex your credit terms each quarter and maximize float with up to 30, 45, or 60 days to pay, adjusting payment schedules to account for supply chain conditions and seasonality.
The reality is, if you’re not paying your vendors via corporate card, you’re likely missing out on key opportunities to earn as you spend. The Rho Card rewards companies with meaningful cash back with every eligible purchase. It also offers higher, stable credit limits that scale with your business.
Securing more cash back might just be the silver lining to rising materials costs. As an added bonus, automating your materials expenses on a virtual card (we’ll get to that next) may allow you to float payments early and take advantage of any vendor discounts like 1%/10 net 30 deals.
Manufacturing is a solid, steady industry, and many companies have long-established processes when it comes to managing payments. Too often, that means paying hundreds of vendors with paper checks and foregoing the benefits that come from updating and automating your AP.
If your AP team is spending one day a week reviewing, cutting, and signing checks, that’s 20% of their work time, which translates to countless lost hours and efforts—not to mention countless lost dollars on postage and missed rebates.
With Rho’s integrated AP tools, these tasks are fully automated. Invoices are routed to a dedicated inbox, where their data is digitally captured and can be mapped to your accounting codes. Smart approval flows make sure every invoice is sent for the right sign-offs before being paid according to preset criteria. And all AP functions sync directly with accounting software like Quickbooks for quick reporting and reconciliation.
In short, your finance team wins back their time, and you can rest assured that every payment is being handled swiftly and securely.
With traditional, manual reporting practices, it’s easiest to just lump your raw materials spend under one category in your ledger, rather than sorting through your transactions and parsing them out item by item or vendor by vendor.
Rho’s real-time reporting and granular data make it easy to get detailed insights into each of your material costs and vendor relationships. With Rho, every expense is instantly reported and categorized on a centralized, accessible dashboard, so you can see how much you’re spending, on what, and with whom.
You can take a high-level view of your spending across different channels, compare different vendor and material costs, track your performance against departmental budgets, and predict future cash flow needs based on your history to make more strategic business decisions.
When you make payments through ACH or wire transfers, each transaction typically carries a nominal fee that, while small, can quickly add up over dozens or hundreds of vendors. Worse still, if you inadvertently overdraw on your account, many banking platforms will impose a non-sufficient funds (NSF) penalty on top of your original charge.
Rho is committed to providing fee-free financial solutions. That means no service charges, no fees on global payments, no overdraft fees, and unlimited checks, cards, ACH transfers, and wires at no extra cost. If you’re curious what that breaks down to in practice, the details of our pricing structure are always fully transparent.
Raw materials are costly enough without the extra time, effort, and fees that could go into paying for them.
With an integrated, automated expense management platform like Rho, you can ensure you’re managing your production costs and vendor relationships effectively and efficiently while using your materials expenses to fuel your growth.
Want to learn more about optimizing your vendor payments? Reach out to our finance specialists, and discover what Rho’s corporate cards, AP tools, and commercial-grade banking can do for your business.