Looking for ways to save? Our latest post explores ways to identify cost-saving opportunities using spend analytics tools and how to realize savings...
As businesses work to recover from the pandemic, they are now facing a new wave of economic uncertainty that will test the resilience of their CFOs. In recent years, the role of the CFO has expanded to encompass a more strategic and transformational focus, requiring more collaboration with the C-Suite, and serving as a trusted advisor to the CEO. In addition to traditional financial responsibilities, CFOs must also drive talent acquisition and retention, automation, technology, digital operations, governance, legal and audit compliance, and overall financial oversight and growth.
As we look ahead, CFOs will face several challenges as they navigate this broad mandate. Prioritization and preparation will be critical factors in determining their success. Here are some of the top challenges we anticipate CFOs will need to address in the year ahead.
Talent acquisition and retention
Finding the right employees and retaining them has always been a priority. With resignations and competition in the labor market at an all-time high, 54% of CFOs polled in a recent Gartner survey believe it will be the most challenging task to manage in 2023.
“CFOs need to identify the few critical areas where investments should be accelerated, such as human capital and digital investments, while optimizing costs against a backdrop of stubbornly high inflation; this is no easy task,” said Marko Horvat, vice president, research, in the Gartner Finance practice. “While raising compensation for top performers is inevitable, higher compensation alone will not solve the talent challenge and will ultimately pressure margins if deployed too broadly.”
The upshot: a reevaluation of an organization’s technology and employee value proposition will need to take place to manage staff expectations and ensure that critical roles are being prioritized and filled using innovative methods. Strategic hiring in key areas will be essential for driving growth.
Accounting oversight, compliance, and risk management
The role of CFOs is crucial in maintaining the economic and operational stability of an organization. They are trusted to implement measures that safeguard the organization from potential threats and risks. In the current business landscape, CFOs need to prioritize risk management through scenario planning, embracing innovation and technology, and implementing internal controls to improve auditability, manage risk, detect fraud, mitigate cybersecurity threats, and navigate economic turbulence.
CFOs must remain vigilant and avoid complacency when it comes to risk management. They must also stay up to date and comply with evolving regulations, such as tax policies, Environmental, Social, and Governance (ESG) requirements, and transparent reporting capabilities.
The impending recession has heightened the urgency to strengthen financial resilience. In preparation for potential economic challenges, CFOs are taking steps to prepare their companies to survive the downturn and emerge in a more robust position. CFOs must prioritize cost containment initiatives to counter inflation, and better manage spending; looking beyond just implementing budget cuts across the board will be necessary. Now, more than ever, reducing the right costs will be imperative, ensuring any financial restrictions that are being imposed won’t negatively impact a company’s operations or growth objectives.
In Gartner’s CFO survey, cutting the right costs was identified as one of the top three priorities for 2023. Blindly cutting costs could lead to unintended consequences, so gaining insight into an organization's spending patterns is crucial for making well-informed and deliberate spending decisions.
Identifying and curbing discretionary and wasteful spending, scrutinizing, and delaying non-essential capital outlays, and managing operational costs will be essential. As financial and operational stewards, CFOs must rationalize expenditure and balance strategic investments.
Operational spend, which includes expenses such as office supplies, travel, entertainment, and staff expenses, is an area that can yield substantial savings when managed effectively. Despite its potential, operational spend is often undervalued and overlooked, highlighting the need for proper oversight and internal controls.
A cloud-based spend management system can help CFOs achieve their cost-saving goals quickly and effectively, regardless of the operating model (remote, hybrid, or office-based). By implementing company-wide spend approvals, policy compliance, budget control, accountability, and spend visibility, CFOs can manage essential spending and eliminate unauthorized and non-essential spending. The first step is to differentiate between strategically critical costs and non-essential costs. With a spend management system, CFOs can easily determine if items are within budget, enforce quoting policies, and direct purchases to approved or contracted vendors that offer the best value.
A recent G2 procurement trend report found that companies that have implemented niche spend management, spend analytics, and procurement systems have realized a quicker return on investment and time-to-value, meaning they’re able to benefit from cost savings and efficiencies faster than those deploying full suite solutions with lengthy implementation times.
2023 is sure to be the year of frugality, with CFOs steering companies to selective, cost-conscious spending. Process digitization, proactive spend management and analysis can build a robust foundation for stabilizing cash flow, protecting reserves, and building financial resilience.
Automation and digital investments
In 2021, many businesses had to embrace technology in new ways to connect teams, enable remote work, and continue driving revenue. The drive to automate financial processes will continue and leading digital transformation will remain a priority in 2023 and beyond; so too will ensuring that software deployments are successful, adopted by users, and delivering on expected outcomes.
Through the adoption of automation and digital process standardization, progressive CFOs can spearhead initiatives to achieve company-wide:
- Operational efficiency
- Increased productivity
- Agility and accessibility
- Business intelligence, visibility, and analytics
- Unified data
- Risk management, auditability, and compliance
- Spend management
- Business continuity
53% of CFOs plan to use data analytics more strategically, consider AI, automation, and cloud solutions to speed digital transformation, according to PwC’s Pulse Survey, 2022.
Achieving user adoption, buy-in from the C-Suite, and effective change management will be critical to the success of these investments.
A CFOs purview will include driving the success of digital investments and increasing automation in financial management. Despite estimates that only one third of processes are currently automated, there is still significant room for digitization and optimization of financial processes.
In these lean times, keeping the lights on and taking advantage of every opportunity to achieve post-pandemic growth will undoubtedly be top-of-mind. Savvy CFOs realize that simply reducing costs will not cut it; making calculated investments in the right technology and people, while implementing an informed spend management strategy will be prudent.
Achieving a balance between cost savings, maintaining quality standards, and expanding customer bases will be challenging tasks for CFOs. By prioritizing operational spend management, scrutinizing capital spending, enhancing automation, evaluating pricing strategies, and making informed data-driven decisions, CFOs will be in a better position to reach growth objectives.
Implementing effective spend management strategies, redirecting cost savings to growth initiatives and reinvesting in their businesses could help CFOs move the profitability needle.
Effective planning will matter for CFOs
CFOs need to adopt an innovative and strategic approach to building and retaining the right teams, supported by the right technology, and reducing the right costs. By prioritizing these core objectives, CFOs can prepare and strengthen operations to drive their businesses forward, regardless of the financial outlook or economic climate.
Chart your course with a spend management system
In navigating 2023 and the challenges that lie ahead, CFOs can turn to spend management systems to mitigate risk, speed cloud transformation, and ensure cost containment to build financial resilience and unlock opportunities for growth in the post-pandemic era.
By deploying a cloud spend management system like Fraxion, you can:
- Proactively manage purchasing processes, budgets, and spending from any location.
- Automate processes and enhance productivity and operational efficiency.
- Empower a cost-conscious and accountable spending culture that’s guided by policies and internal controls to reduce operational costs.
- Gain insights, visibility, and spend analytics that uncover opportunities to save and drive business growth.
- Ensure transparency that improves auditability, reporting efficiency, and prevents the risk of fraud.
- Achieve ROI and time to value via ease of use, scalability, budget control, and cost reductions.
Contact a spend management specialist to discuss your digital, risk, cost containment, and cloud system needs.