Corporate finance departments are actively looking for places to cut costs, but two areas that remain relatively safe are staff and technology.
The survey of finance leaders conducted by Grant Thornton found that 44% of CFOs cited cost optimization as one of their top two priorities. At 42%, vendor and supplier costs were seen as the top area for projected cost savings amid ongoing supply chain pressures. They also expect people to travel less, with 41% saying they intend to not spend as much over the next year. The report noted this has jumped from 24% the previous quarter.
Companies are also trying to reduce discretionary spending by delaying long-term projects, revising managed service agreements, and even reducing compliance costs.
This urge to cut costs, however, is juxtaposed against a high degree of optimism about the economy. The survey found that 21% were pessimistic versus 48% who were optimistic. This has led many to be hopeful about the prospects of their respective organizations: 68% said they expect revenue growth at their organizations over the next 12 months, and 67% expect net profit growth, a dip of just one percentage point from the previous quarter.
Many finance leaders aim to hold the course for staff and technology, according to the report. Those who are optimistic about the economy in the future believe that, in order to fully capitalize on this, they must build and preserve a workforce that can help drive them forward when the next growth curve occurs, and they must make technology investments that have the potential to deliver efficiency and revenue gains.
In terms of personnel levels, the proportion of finance leaders who said they anticipate layoffs soon has dropped from 40% last quarter to 27% this quarter. More CFOs understand that mass layoffs can be a penny-wide-pound-foolish decision, according to Margaret Belden, director of people and organization for Grant Thornton, who contributed to the report, as the short-term savings are outweighed by the long-term consequences of so many people leaving. Far from laying off staff, 58% of finance leaders said their top workforce priority is attracting and retaining key talent.
Meanwhile, CFOs are counting on technology to boost the performance of talent. The poll found 78% of CFOs agree or strongly agree their technology allows their people to maximize their output and efficiency. This could explain why, for the first time since 2021, more than half of finance leaders, 53%, said they expect to increase spending on IT and digital transformation initiatives over the next 12 months.
CFOs believe such an expansion of one’s digital infrastructure will require extra security measures: nearly 60% said they expect to spend more on cybersecurity over the next year, making it the most common area where they anticipate expenses to rise. IT/digital transformation spending was the second most common, while sales and marketing, at around 35%, was a distant third.
This emphasis on technology spending, according to the report, comes from the expectations of employees who fear they will fall behind in their careers if they use outdated tools, as well as customers and vendors who want to do business digitally. CFOs expect to spend more on tech because the underlying data model of an organization is so integrated that everything has to be digital or processes won’t be compatible. Advances in mobility and analytics have made it possible to connect any device to a network and improve your operations.
The report noted, too, that many CFOs have been experimenting with how generative AI, such as ChatGPT, could improve their businesses. Nearly one-third (30%) of CFOs said their organizations are using generative AI. An additional 55% are exploring potential uses for generative AI.
Oversight, however, is spotty: 52% of generative AI users surveyed have clearly defined acceptable use policies, according to the report, while 44% say their board of directors has taken an active role in understanding governance over AI. However, it’s not like people aren’t thinking about this: 60% of those polled have defined and monitored the risks associated with generative AI. As leaders who adopt AI face these risks, more will want to ensure the presence of guardrails to prevent serious damage to their organizations, customers and investors, as well as their reputations.
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