How Manufacturing CFOs Can Navigate 2025 Economic Forces
Manufacturing chief financial officers (CFOs) play an important role in navigating economic uncertainty.
High interest rates, ongoing inflation, and the new administration’s tariff policies are reshaping today’s financial strategies, especially in manufacturing. These shifts influence working capital, borrowing costs, supply chain decisions, and profitability.
While these challenges create hurdles, they also present opportunities for CFOs who take a proactive approach to financial management and technology adoption. Using enterprise resource planning (ERP) systems can help manufacturing leaders gain real-time visibility, automate critical processes, and make informed decisions that support resilience and growth.
Following are strategies for CFOs as they meet the challenges of various economic forces, mitigate risks, and maintain financial stability.
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High interest rates: The cost of borrowing and capital investment
Interest rates remain high, which makes capital investment and short-term borrowing more expensive and demands even more strategic decision-making in financial management. CFOs must weigh financial decisions carefully, as funding equipment, expanding production, or carrying extra inventory has greater cost implications in a high-interest rate economy.
Strategies to manage high interest rates
- Optimize working capital. Reducing reliance on debt starts with better cash flow management. Tracking days payable outstanding (DPO), days sales outstanding (DSO), and inventory turnover can help businesses use cash efficiently.
- Refine payment terms. Shorter customer payment terms bring in cash faster while extending vendor payments allows manufacturers to retain cash longer.
- Automate collections. ERP systems support proactive collections strategies, such as automated reminders for upcoming payments and customer payment insights, which can help manufacturers get paid faster.
- Improve cash flow visibility. Real-time forecasting tools in ERP platforms can help CFOs anticipate cash needs and avoid unnecessary borrowing.
Inflation: Rising costs and margin pressures
Inflation drives up costs across labor, raw materials, and logistics. While some manufacturers can adjust prices, others must absorb the impact, which tightens margins. Managing inflation effectively requires strong contract management and supply chain flexibility.
Strategies to manage inflation
- Use long-term supplier contracts. Securing vendor pricing through long-term agreements can help stabilize costs. Blanket purchase orders and vendor agreements, tracked within an ERP system, provide better pricing consistency.
- Adjust pricing strategies. Businesses with dynamic pricing models built into an ERP system can adapt pricing based on cost fluctuations.
- Optimize inventory management. Holding excess inventory ties up cash. Streamlined ERP systems can help manufacturers balance supply with demand and prevent overstocking while maintaining availability.
- Track labor costs. Rising wages and worker shortages increase expenses. An ERP system can help forecast workforce costs and optimize labor planning.
Tariffs: Trade policy uncertainty
Tariffs create uncertainty because potential trade restrictions affect material costs. For manufacturers that rely on global supply chains, unexpected tariff increases can disrupt pricing and margins.
Strategies to manage tariffs
- Diversify sourcing. Expanding supplier options and considering nearshoring can reduce dependence on tariff-heavy regions.
- Integrate tariff costs into COGS. Instead of treating tariffs as an added charge, a well-configured ERP system incorporates them into the total cost of goods sold (COGS) for more accurate margin analysis.
- Adapt pricing models. Like inflation, manufacturers must assess whether they can pass tariff costs to customers or adjust financial strategies accordingly.
- Monitor policy changes. While trade policies remain uncertain, finance leaders can use ERP forecasting tools to model different scenarios and plan ahead.
How ERP systems help CFOs navigate economic forces
Economic pressures aren’t new, but their effects can be more significant in a volatile economy. The key to staying ahead lies in visibility, automation, and financial discipline – all of which can be supported by an ERP system.
The following proactive financial strategies can help CFOs stay in control.
Real-time financial dashboards
In real-time, CFOs can track key metrics such as DPO, DSO, inventory turnover, and working capital balance. This tracking ability helps them quickly identify cash flow bottlenecks and adjust strategies accordingly.
Automated collections and payments
Streamlining accounts receivable supports faster cash inflows, while structured accounts payable management allows finance teams to strategically time outflows.
Inventory and procurement planning
Advanced material requirements planning tools help manufacturers align purchasing decisions with demand, which helps prevent excess inventory buildup and optimize supply chain costs.
Scenario planning and forecasting
A well-integrated ERP allows finance teams to model different economic scenarios – whether an interest rate hike, raw material price surge, or tariff increase – so they can make proactive decisions instead of reacting to crises.
The Crowe NetSuite team is here to help
Navigating financial challenges in manufacturing requires the right tools and expertise. The Crowe NetSuite team specializes in helping manufacturers optimize financial processes, automate workflows, and enhance visibility. Whether improving cash flow management, streamlining operations, or building resilience in an unpredictable market, Crowe specialists can guide your business through every step.
Streamline systems, gain insights, and boost efficiency with support that stays with you
NetSuite specialists at Crowe are ready to help you apply automations, explore industry solutions, and remove hurdles for continued growth.
Contact Crowe to learn how we can support manufacturing businesses in this evolving economic landscape.
