**London**: The manufacturing and construction sectors face unprecedented challenges, driving CFOs to adopt real-time financial planning tools. Amid rising costs and supply chain disruptions, companies are urged to enhance their operational resilience and maintain competitiveness in a volatile economy.
Manufacturing and construction sectors are currently facing unprecedented economic challenges, as highlighted by Cory Teller, Principal at UHY, in an analysis for CPA Practice Advisor. The evolving landscape is marked by a multitude of pressures including supply chain disruptions, inflation, labor shortages, and regulatory changes, which contribute to an environment where uncertainty reigns supreme.
This period of volatility has made traditional financial forecasting methods insufficient. Companies are grappling with rising material costs, particularly due to current tariffs that have inflated steel and aluminium prices significantly. The introduction of a 25% tariff has caused project costs to escalate by between 8-10% for some firms. In addition, construction costs in the United States have surged between 25-40% since 2020, and European markets are projected to witness a 2-4% increase in construction costs by 2025.
Teller notes that financial implications of these disruptions are profound. For Chief Financial Officers (CFOs), the imperative for real-time financial insights has never been stronger. Traditional, static financial models leave companies vulnerable to risk, which is why many are now turning to modern financial planning and analysis (FP&A) tools. These tools offer several advantages, including:
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Faster Decision-Making: In a rapidly changing environment, immediate access to financial data enables finance leaders to make swift, strategic adjustments. This rapid data capability is crucial when facing supplier cost increases or other unforeseen project delays.
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Enhanced Cash Flow Management: Up-to-date visibility into cash flow allows companies to optimise capital allocation and mitigate dependency on costly short-term financing.
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Dynamic Forecasting: By employing predictive modelling, executives can simulate various market conditions—including fluctuations in material costs and interest rates—to prepare for potential crises.
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Proactive Risk Management: Real-time analytics facilitate early detection of financial issues, allowing firms to proactively implement risk management strategies.
Despite these clear benefits, many companies encounter significant hurdles in adopting real-time FP&A solutions. Among the challenges are siloed data and legacy systems that hinder a unified financial overview, as well as an overreliance on manual spreadsheet-heavy workflows that increase the risk of errors. Additionally, obtaining organisational buy-in for such a paradigm shift is often met with resistance.
CFOs are encouraged to take a structured approach towards enabling real-time FP&A, starting with assessing current processes to pinpoint inefficiencies. Investing in modern financial planning tools that facilitate predictive analytics and automated workflows is paramount, as is integrating both financial and operational data to eliminate information gaps. Furthermore, fostering a data-driven culture and ensuring robust governance and compliance are crucial for successfully leveraging cloud-based financial systems.
Failing to make these necessary shifts carries significant risks, such as inaccurate forecasting, missed growth opportunities, and cash flow disruptions. The need for agility in financial management has never been more crucial, particularly in a landscape characterised by economic uncertainty.
Teller emphasises that as manufacturing and construction sectors navigate this complexity, the call for financial agility becomes the new mandate for CFOs. Companies that strategically embrace real-time insights and modernised financial planning will not only enhance their operational resilience but potentially outperform competitors in the ongoing economic turbulence. The focus for CFOs moving forward is clear: adapt to the changing environment, optimise operations, and ensure their organisations are well-positioned for whatever uncertainties lie ahead.
Source: Noah Wire Services
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