Three questions on the minds of CFOs for 2023

What’s keeping CFOs awake at night, with a new year on the horizon? Ilija Ugrinic, Commercial Solutions Director at Proactis,  shares his thoughts on the three big questions on the minds of most CFOs 

  1. How do I flex my cost base to align with revenue?

If there is one certainty about 2023, it’s change. Will inflationary pressures come to an end? What will be the impact of climate change? How will companies cope with a global recession? Confidently forecasting a top line performance next year will be challenging. This will put increasing emphasis on the importance of financial flex: the more control and flexibility in your cost base, the more confidence you will have in managing profitability. Included in this thinking must be the role of the finance department itself. The raw cost of a finance department has reduced by 25% over the past decade, and those in the highest performing teams are running at almost half the cost of an average finance department in the same time frame. This shows the value in a continuous cost-benefit evaluation of the function and performance of finance.

  1. How do I tackle the FX challenge?

Tackling exchange rate volatility is a primary concern for CFOs whose organisations trade internationally. Between May and September this year, the value of the Pound against the Dollar fluctuated by 18%. If you’re considering a £10 million investment in the US, that’s a £1.8m real terms difference in the value of your cash. Supply chains and logistics, sales, food supplies and professional services fees are all examples of line items on a ledger that could fluctuate thanks to FX volatility. Of course, many businesses use hedging instruments to mitigate the risk of exchange rate fluctuations. Forecasting consistently is a crucial part of every CFO’s job description, and a fundamental part of a company’s chances of success. The problem is, in extremely volatile market conditions such as those seen since the conflict in Ukraine began, even hedging cannot prevent macro economic shifts and price rises. Assessing why exchange rates are shifting and utilising strategies to prevent risk will be crucial.

  1. How do I improve access to real time data?

Finance teams are constantly seeking more control and transparency over the nature and timing of spend. CFOs wanting to make strategic contributions to business strategy need better evidence of how spend is fluctuating, and what it consists of, in real time. The problem is, many organisations do not have the right databases, nor the clean data, to make effective use of the software available to them. A study of senior executives found that just 28% felt that their company had suitable software solutions to use data analytics effectively.

International and growing businesses face similar hurdles in this respect – in both cases, legacy or different systems that include entirely manual processes (or a mix of manual and electronic processes) cause delays and inconsistencies that do little to aid decision-making. In 2023, CFOs will prioritise information quality and, above all, faster access to spend data.