When discussing the competitiveness of manufacturing businesses, factors commonly mentioned include productivity, output, cost optimization, resources (equipment, labor), market, and compliance with standards. However, in the context of constantly changing markets and supply chains, financial adaptability – or Financial Agility – is increasingly playing a crucial role in maintaining operations and supporting businesses in making timely decisions.

In the following article, Mr. Tran Quoc Hung (Senior Expert in ERP Solution Implementation Consulting, 1C Vietnam) will analyze the necessity and guide manufacturing businesses on how to build Financial Agility.

1. What is Financial Agility? Why is Financial Agility becoming increasingly important for manufacturing businesses?

Financial Agility reflects a company's ability to adapt quickly to changes in the business environment by monitoring, evaluating, and adjusting its financial decisions.

In a supply chain environment where raw material prices, exchange rates, and interest rates can fluctuate constantly, businesses need not only financial reports reflecting operating results, but also the ability to monitor and evaluate financial performance over shorter periods to make timely decisions.

This has also led to a shift in the roles of the CFO and the finance department. Instead of primarily focusing on recording and compiling data, the finance department is increasingly involved in the planning and operation of the business.

2. Common barriers to financial agility for manufacturing businesses.

Although the importance of flexible financing is increasingly emphasized, many businesses still face barriers in implementation and operation. Some common challenges include:

- Budget management follows a rigid model, lacking the ability to adjust when business conditions change.

- Focusing on profit and loss results without fully monitoring indicators reflecting the financial health and risk level of the business.

- Data is scattered across multiple systems, making it difficult to assess the financial situation in a timely manner.

- Manual processing relies heavily on approvals, slowing down the response time to changes.

These factors can directly impact a company's decision-making ability and its ability to adapt to market changes.

3. How should manufacturing companies build Financial Agility?

a. Visual and transparent financial data

Access to accurate and timely financial data helps businesses see the current financial picture clearly, rather than waiting until the end of the period to analyze reports. Key financial indicators need to be monitored regularly over shorter periods to support the decision-making process.

For example, in businesses with large inventories, such as the steel industry, inventory can mask risks related to solvency. Continuously monitoring the Quick Ratio helps businesses identify early signs of cash flow imbalances and proactively implement solutions such as accelerating inventory sales, extending short-term debt repayment periods, or reallocating production.

b. Proactively develop multiple budget scenarios.

Instead of managing budgets according to a fixed plan with predetermined targets, businesses can develop various scenarios to respond to fluctuations related to supply chains, exchange rates, or interest rates.

Reviewing and adjusting budgets over shorter cycles also helps businesses respond more quickly to market changes such as supply chain disruptions, fluctuating exchange rates, or sudden increases in interest rates.

c. Strengthen the links between financial data and operational data.

Financial data, by its very nature, only reflects the final results of operational activities. Therefore, to enhance financial resilience, businesses need to strengthen the link between financial data and operational data.

When data from production, purchasing, sales, inventory, and finance are connected on the same management system like ERP, businesses can assess the financial impact of operational decisions more quickly and comprehensively.

d. Promote process automation

Many financial processes still consume significant processing time for tasks such as managing documents, invoices, or reconciling payments. Applying automation technologies can help businesses shorten processing times, reduce manual operations, and increase information flow.

Some common applications include:

- Automate processes according to a variety of rules.

- Synchronize payment data with the bank and electronic invoices.

- Using OCR to extract invoice data and cross-reference documents.

- Automatically generate receipts/payments based on AI tools integrated with the ERP system.

4. Conclusion

In a constantly changing market environment, Financial Agility is not just a challenge for the finance department alone, but also involves the ability to monitor data, plan, and coordinate operations across the entire enterprise.

Building flexible financial capabilities through data transparency, developing multiple budget scenarios, strengthening the linkages between financial and operational data, and promoting process automation can help businesses improve their adaptability to changes in the business environment.

What challenges are you facing in your manufacturing business with flexible financial management? Share your thoughts with 1C Vietnam HERE .