As the C-Suite enters what is likely to be another challenging and volatile economic year, top executives may be looking to achieve slightly more conservative growth targets than usual. Macroeconomic forces such as inflation, rising interest rates, challenging foreign currency fluctuations and a pending recession will continue to have an impact on cash flow. As financial and operating budgets become even more important and tighten, the C-Suite will need to continually think and act strategically as they plan for the year ahead.
It remains important to be nimble and able to adapt to a quickly evolving economic landscape. In the meantime, critical business decisions must be made as senior management sets priorities and prepares for the new year. Here are five key considerations for CFOs to keep top of mind as they organize and prepare in the early days of 2023.
Set achievable goals
Be realistic about what you can accomplish this year—now may not be the time to prioritize M&A or launch a new product with higher hurdle rates given higher interest costs. Routine operations will already be more expensive as it is, so anything new that might add significant weight to your expense sheet could be a risk. The CEO and CFO need to collaborate very closely to make strategic decisions on allocation of resources and capital and set achievable operational and financial goals to drive business growth throughout 2023.
Develop flexible forecasting models
If there’s one thing we learned in 2022, it’s that our forecasting models needed to adapt. Inflation, interest rates and foreign currency have already had a tremendous impact on business earnings in the past few financial quarters—far more than originally anticipated. If they haven’t done so already, CFOs will need to take these factors into account and design and implement flexible forecasting models for 2023 as these market conditions evolve.
Streamline and automate manual processes
In an effort to increase accountability and awareness around ESG efforts, the SEC has recently introduced a new climate disclosure rule that will likely add a significant operational burden on publicly traded finance and accounting teams. Now is the time to ensure your operational and financial reporting platforms are scalable so that when workload picks up, your team is ready. By automating and streamlining the financial close and financial reporting processes, the Office of Finance can simplify and quickly support the integration of these new compliance processes.
Invest in digital transformation for long-term growth and profitability
Digital transformation strategies are a core enabler of long-term profitable business growth. Supporting the Office of Finance with the right technologies, such as automation, makes your business naturally more agile in preparation for any new market circumstances, M&A opportunities, etc. Additionally, modernizing financial reporting processes with supportive technologies can reduce hours spent on inefficient manual processes, improve reporting accuracy and free up time for finance teams to focus on more value-additive work. These proven digital technologies can also support more informed, data-driven decision making across the C-Suite. Finally, automation becomes more important than ever as companies think about ways to streamline their workforce, particularly as continued challenges in the talent and labor market persist.
Focus on finance talent retention & upskilling
Retaining top financial talent remains a critical issue that many CFOs are continually struggling to solve. As many companies deal with ongoing wage growth and keeping up with the high pace of inflation, CFOs must find other ways to engage and empower their teams. A key tenet of your talent retention strategy should be upskilling your team with the skills they need to fill the gap in reduced team sizes, as well as support business priorities and objectives for the year ahead.
Keeping these five considerations in mind will be important for CFOs as they navigate the new year. Senior management will still debate capital and resource allocation throughout 2023, but maintaining a strategic business mindset can support the decision-making process. The current economic environment presents many challenges, as we’ve already seen, but there are ways to mitigate potential risks and set achievable growth targets, while still remaining focused on cash flow.