As 2025 draws to a close, manufacturing leaders face a familiar yet increasingly complex challenge: maintaining healthy cash flow while investing in the capabilities that will define competitive advantage in 2026 and beyond. In our conversations with manufacturers across Ohio and beyond, two topics dominate the discussion – immediate cash flow management and the strategic integration of artificial intelligence. But these priorities don’t exist in isolation. They’re deeply intertwined with tariff planning, inventory strategies, tax considerations, and supply chain resilience.
The Cash Flow Reality Check
Manufacturing has always been a cash-intensive business, but today’s environment presents unique pressures. With potential tariff changes looming in 2026, manufacturers are caught between building inventory buffers now and preserving cash for operational flexibility. Extended payment terms from customers and rising carrying costs only compound the challenge.
What we’re seeing with our manufacturing clients is a shift from reactive cash management to proactive cash optimization. The most successful manufacturers aren’t just monitoring their cash position – they’re actively engineering it through strategic decisions about inventory valuation methods, supply chain partnerships, and capital investments.
Consider inventory valuation strategies in this context. With many manufacturers carrying higher inventory levels as a hedge against both supply chain disruption and potential tariff impacts, your year-end valuation method choice significantly impacts both tax position and cash availability. The conversation isn’t just about LIFO versus FIFO anymore – it’s about aligning your inventory strategy with broader cash flow objectives while navigating OBBBA implications for your specific situation.
The AI Investment Dilemma
Meanwhile, artificial intelligence has moved from the “nice to have” column firmly into “business imperative” territory. The manufacturers who aren’t actively exploring AI applications are increasingly finding themselves at a competitive disadvantage. Yet AI implementation requires investment – not just in technology, but in training, process redesign, and often cultural transformation.
The timing couldn’t be more critical. With Section 179 deductions and bonus depreciation available for qualifying equipment and technology investments, year-end presents a unique opportunity to acquire AI capabilities while optimizing your tax position. But the real value lies deeper than immediate tax benefits.
Creating Your Integration Strategy
The key insight emerging from our advisory work is that all these elements – cash flow, AI adoption, tax planning, and supply chain strategy – form an interconnected system. Smart manufacturers are finding ways to make them mutually reinforcing.
For instance, AI-powered demand forecasting doesn’t just reduce inventory carrying costs; it helps you model different tariff scenarios and adjust sourcing strategies accordingly. Automated supply chain analytics can identify alternative suppliers before disruptions hit, protecting both operations and cash flow. The OBBBA provisions affecting your business might influence whether to accelerate certain equipment purchases before year-end.
As you evaluate technology investments, consider the total value equation. Yes, current tax incentives can provide immediate benefits. But select investments that solve multiple challenges simultaneously – improving operational efficiency, enhancing supply chain visibility, and positioning you for whatever 2026 brings.
Planning Your 2026 Approach
As you close out 2025, build an integrated plan:
First, model your cash flow under different scenarios – varying tariff impacts, supply chain disruptions, and demand fluctuations. Use this analysis to inform your inventory valuation decisions and capital allocation strategy.
Second, identify which technology investments can deliver both immediate tax benefits and long-term operational advantages. Focus on capabilities that strengthen your entire value chain.
Third, don’t overlook OBBBA updates that might affect your specific manufacturing segment. These implications should factor into your broader tax and investment strategy.
The manufacturers who thrive in 2026 will be those who approached year-end 2025 with a comprehensive view – balancing immediate cash needs with strategic capability building.
Ready to Take Action?
Your Rea advisor understands how these pieces fit together for Ohio manufacturers. Whether you’re modeling tariff scenarios, evaluating AI investments, optimizing inventory strategies, or navigating OBBBA changes, we provide integrated guidance that addresses your complete picture.
Don’t wait until 2026 kicks off to start planning. Contact your Rea advisor today to discuss your 2026 readiness across all these critical areas. Together, we’ll build a roadmap that positions your manufacturing operation for success regardless of what lies ahead.
Ryan Brickwood, CMA, MBA, is Rea’s Principal Manufacturing & Distribution Industry Lead. With nearly 20 years in accounting and manufacturing, Ryan helps manufacturers navigate complex challenges in cost analysis, ERP implementations, and operational transformation.
