2024 United States Tire Industry Outlook 

Source: U.S. Tire Manufacturers Association

In recent times, the tire industry in the US has undergone significant transformations due to increasing customer demands, the adoption of automation technologies, and new regulations from the government. In addition, the increase in raw material costs has led to an increased production cost. Right now, with the rise of labor costs and supply shortages, working capital management has become the top priority for the US tire industry.      

Thanks to the advancements in B2B technology landscape, tire manufacturers can now optimize their working capital management by leveraging finance automation. Over a third of these firms are preparing for a possible economic slowdown by investing in technology to automate manual processes. Technology addition is facilitating the expedited payment collection and streamlining of back-office processes – solutions strategically designed to mitigate the challenges within the tire industry.  

Key Challenges in Working Capital Management for Tire Manufacturers 

The finance leaders in the tire manufacturing industry grapple with a multitude of challenges in effective working capital management. 

• Manual processes: Most tire manufacturing companies still manage their back-office operations manually, a time-consuming approach that hinders revenue growth. Inefficient management of Accounts Receivable (AR) and Accounts Payable (AP) functions results in delayed collections and suboptimal customer experiences.
       

• High operating costs: Escalating operating expenses, primarily driven by labor costs and supply shortages, pose a significant challenge. Businesses struggle to reduce operating costs amid heightened customer demands, often due to reliance on legacy systems or manual processes.  
  
  

• Cash flow challenges: The extensive network of dealers/customers complicates receivables management, leading to unsteady cash flow. Inefficient credit risk management and subpar collections processes contribute to this issue.     
  
  

• Inventory management: Maintaining adequate inventory levels to meet customers’ demands while avoiding excess inventory and tying up working capital is a constant concern. Overstocking limits, the growth potential and triggers a cash flow crunch.    
  
  

• Late payments: Late payers and delinquent customers impact the smooth functioning of a company’s operations significantly and affect the overall working capital management. The rising cost of tires, prompt customers to defer payments, further complicating the finance management.

Addressing Challenges in the Tire Industry Environment with AR & AP Automation  

The offices of the tire company CFOs are undergoing a massive digital transformation to tackle prevailing challenges. Embracing end-to-end AR and AP automation, automated financing, and analytics platform facilitates seamless collaboration between buyers and sellers. This makes the B2B payments experience smooth and supports faster collections, reconciliation, and straight-through processing (STP), resulting in massive working capital efficiencies.  

Effectively addressing these challenges requires a meticulous examination of specific finance processes within the tire industry that warrant optimization. In the section below, we will delve into the key areas within accounts receivable & accounts payable, which can be transformed using automation.   
     

Accounts Receivable Process  

• Invoicing:    

Implementing automation in your invoicing process streamlines invoice generation, delivery, and tracking. It ensures 100% accuracy in invoicing, eliminating human errors and delays. The Electronic Invoice Presentment and Payment (EIPP) solution gives finance teams a real-time view of invoice status and also empowers the dealers with a self-service portal from which they can pay their invoices independently.   

• Collections:    

Automated collections management systems enable the finance teams to send timely payment reminders and follow-up communications. It prioritizes the accounts based on customer payment behaviors and history so collectors can focus on critical tasks accordingly.   

• Cash Application:    

The cash application process is highly resource-intensive in the tire industry as it involves a huge volume of transactions. Automation ensures fast and accurate cash application, which requires no manual intervention. It helps businesses achieve same-day cash posting with around 90%+ hit rate.     

• Deductions Management:    

Automation solutions identify short payments and overpayments, and instantly detect the reason codes. Implementing automated workflows for deductions management helps minimize revenue leakage and ensures timely dispute resolution.    

Accounts Payable Process   

• Invoice Management:   

An automated solution aggregates incoming vendor invoices and auto-read these invoices to validate them against purchase orders. It automatically uploads the validated invoices to ERP, saving the finance team’s time to focus on high-value tasks.   

• Approval Workflows:   

Verification workflows can be automated to identify discrepancies and prevent payment errors. AI-powered automation solutions enable 3-way matching for purchase orders, invoices, and receipts, ensuring accuracy and reducing manual efforts. It also helps to set custom workflows for multi-level and multi-department approvals.   

• Payouts:   

AP software enables automated vendor payouts as per the due date. Then, it sends the payout file to the bank and updates the payment status, which helps the finance teams to have better visibility on DPO (Days Payments Outstanding).   
 

By adopting automation within accounts receivable and accounts payable, tire manufacturers stand to gain not only in operational efficiency but also in overall financial health. 

Wrapping Up 

As tire companies prepare to weather the challenges in 2024, it is observed that they are increasingly relying on banks and fintech providers to modernize B2B payments through digital solutions that will drive stronger cash flows. 

At Global PayEX, we help businesses of all sizes in the tire industry to optimize working capital management by automating the end-to-end AR & AP workflows with our AI-driven product suite. Talk to our experts to learn more about our solutions.