Creditsafe's recently released 'Rising Costs in Manufacturing' report highlights how Irish manufacturers are struggling to manage soaring costs, but remain hesitant to break down silos for strategic cost-management initiatives. Declan Flood—a seasoned industry veteran, author, and credit management specialist—shares his insights on how Irish credit managers can tackle cash flow risks and improve decision-making in manufacturing firms, where siloed structures are becoming the norm.
Creditsafe’s ‘Rising Costs in Manufacturing’ report has unlocked many interesting findings that will be of great benefit to the sector. From a credit management perspective, I am happy to include my experience in credit management, finance and supply chain management to address some of the most glaring issues facing the manufacturing sector and provide some possible solutions.
While 88% of the manufacturers surveyed believe their finance, supply chain and sales and marketing teams are aligned in their cost reduction strategies, it is clear that in some cases, the processes are not so well aligned.
If only 10% of manufacturers found adjusting or increasing prices “effective” in fighting rising costs, are the other 90% absorbing the increases? If so, this will have a negative impact on margin, that will put further pressure on the business.
I fully endorse the idea that improvements are needed to improve data sharing between departments, and for ongoing success it is vital that all departments work together seamlessly to achieve the goals of the company.
The current corporate climate fosters silos and for the whole business to be successful, an understanding and appreciation of the knock-on effects of departmental decisions on the other departments should be addressed.
If only 10% of manufacturers found adjusting or increasing prices “effective” in fighting rising costs, are the other 90% absorbing the increases?
Another striking point in the report was the appetite for future tech investments. The benefits of automation are evident, and as AI becomes more embedded in our everyday lives, this is an area that needs to be addressed universally. It is worrying that only 14% of respondents are looking to increase investment in the tech tools required. Like everything in life, you get what you pay for and investing in technology needs to on the top of everyone’s agenda. Without it, you are in danger of being left behind. The pace of change in the AI sector is mind-blowing, and it is up to every individual to keep up to date with developments and new possibilities that this technology brings, and this will have to be accompanied with the required investment.
From a credit perspective it is reassuring to see that 91% of companies have sufficient cash flow to pay all their suppliers in the next 6-12 months. It is the other 9% that need to be identified and managed, before they become a problem.
Declan’s Advice: Adopting a ‘Lead to Cash’ approach
The report also highlights the need for informed negotiations, I would like to add to this. I have always advocated a “Lead to Cash” approach to business which involves greater internal communications to keep everything running smoothly. We all know that sales and marketing teams are under pressure to bring in new business, and new business takes time to deliver, depending on the product, this can take months or even years. Traditionally, the credit team are advised at the time of order and then they are under pressure to make a quick credit decision.
If you make the decision to adopt the “Lead to Cash” system, this involves the sales and marketing teams sharing their leads with the credit team right from the start. At that stage, they can set about getting all the relevant information regarding the credit worthiness of the potential customer, assess their prospects and decide what level of business they would be prepared to extend and on what basis. These findings then form part of the ongoing negotiations with the customer. It also ensures that there is no time wasted on meeting prospective clients, going through the proposal and quotation phases to find the account presents too high a risk for ongoing business.
There is nothing worse than going through all the stages, getting the customer to agree to a deal, starting to get the order ready for dispatch, to find that credit is refused, and the order is held. Apart from the cost involved, it can also inflict reputational damage on your customer if you are not in a position to deliver as agreed.
In some of these cases, I have seen credit departments overruled in favour of the commercial considerations and the need to drive revenue. Be warned, the pursuit of revenue alone does not constitute good business. To me, business is only good business when it is profitable. Being burdened with queries, disputes, late payments and in extreme cases – non-payment, this can have a negative impact on the margin, that needs to be carefully managed.
My challenge to credit managers is always to find a way to deliver every order, and there is always a way. It might be with extended credit terms for customers with an excellent credit score or it might be on reduced terms for customers with a poor score, it might be payment in advance for customers with a terrible credit score. Your thought process should always focus on profit.
A Credit Manager’s Holistic Approach to Business
I would also recommend a holistic approach to business, having simple rules like if their credit score is X we will extend credit and if the score is Y, then we won’t, is too simple. You need to look at so many factors, including: The margin achieved on a product, the security available, the reputation of the owners, the prospects for the business, the stage your product is at, your understanding of your exposure and potential loss.
Understanding your potential exposure is vital, and this should be calculated on an ongoing basis for large customers to avoid surprises.
The margin achieved on a product can determine your approach. For example, if you are making a 5% margin, your required sales to offset a potential loss is 20 times your sale. If you are making a 200% margin, a potential loss is less costly to the business.
Sometimes you can get security to offset possible losses from high-risk businesses, these can take the form of personal guarantees, bank guarantees, credit insurance or charges on assets. Every possibility should be explored before business is refused.
There may be a new company with no trading history or scores available and you are required to look behind the company to make a decision on their prospects.
Every product has a life cycle, and you must know where yours is at all times. If you are new to the market, then market penetration is important, so the decisions you make might be lenient. As a credit manager in the FMCG sector I made sure that potential losses from delivering new products to known high risk accounts were factored into the marketing costs and not seen as a bad debt write off.
Understanding your potential exposure is vital, and this should be calculated on an ongoing basis for large customers to avoid surprises.
Finally, make sure you involve every department in all key decisions. Everything is linked and will have a knock-on effect on the others. Procurement, finance, sales and marketing and of course I would add credit to the list, need to be on the same page at all times. Your credit department holds the secrets of everything that is going well and everything that is not working in your business. Properly managed, this function has the potential to drive your profits upwards and maintain an excellent reputation in the marketplace.
New Research Report
Rising Costs in Manufacturing Report 2025
About Declan Flood:
Declan Flood, Chief Executive and Founder at Irish Credit Management Training (ICMT) is an industry veteran with a career spanning over three decades. He is recognised as a thought leader in Credit worldwide for his total business approach to credit that is not only about getting paid in full and on time, itis also about maintaining excellent customer relationships, finding a way to deliver every order, and promoting profitable sales while effectively managing credit risk and understanding the need for risk mitigation.
Declan has spoken at conferences around the world from Mexico to Canada and Helsinki to South Africa including London, Malta and his native Ireland. Declan is an energetic and motivational speaker, who challenges the audience with new thinking on the topic of credit and presents a dynamic picture of the 21st Century evolution of credit and how it should be managed to maximise profitability for every business.
About About ICMT:
ICMT specialises in providing expert education and training on all aspects of credit, to help anyone responsible for the credit function to perform at a higher level and get better results.
Reach out to Declan for more information.