With several financial headwinds to confront, CFOs could be forgiven for wondering where to start in their efforts to guide their businesses through these tough times. Certainly, the most significant challenge facing many companies is inflation. Although many commentators believe price rises will level off to some extent in 2023 as one-off cost increases feed through, CFOs still need to ensure that they have a strategy to manage inflation and keep costs down.
Increasing prices is not an option for many companies as consumers and other businesses experiencing cost pressures are unable or unwilling to pay more. Meanwhile, the recessionary environment widely predicted for many countries next year compels CFOs to reduce costs, improve efficiencies, and adopt new technologies.
1. Improving Cash Flow
A recent global survey of CFOs conducted by Everest Group, supported by WNS, found improving cash flow continues to be a priority for a large majority, with most of those interviewed supporting their organizations' efforts to identify opportunities here. The adoption of real-time cash forecasts and days sales outstanding (DSO) and days payable outstanding (DPO) analytics and dashboards has significantly increased. Meanwhile, many organizations also use predictive analytics to anticipate late payments and leverage behavioral analytics to identify the best approach to managing late-paying customers.
The survey found that more than 70% of organizations confirmed increased investments in advanced analytics and technology. Many organizations using advanced analytics have unlocked millions of dollars of incremental cash flow. However, most organizations are still in the early stages of adoption, having only achieved improved visibility.
CFOs must transform their finance operations into an insights-led digital enterprise that delivers significant value to the business. This is dependent on their ability to balance tech-led and process-led transformation. A bias towards a process-led transformation approach will extract the full potential of their finance operations capabilities.
2. Strengthening Risk and Compliance Management
Risk and compliance management is another area currently driving significant ROI and investment. Building a robust compliance and risk management practice should be a priority for CFOs over the next 12 months.
According to the survey, controllership and compliance initiatives to mitigate risks (regulatory or otherwise) were the second largest area of focus (after cash flow) for most organizations. Increasing risk exposures (e.g., cybersecurity, data privacy) were considered a significant challenge by more than 50% of respondents. Having identified this goal, CFOs must ensure they have the workforce to bring about the required changes. Staff that once carried out manual, repetitive tasks, now managed by new technologies, must be re-trained and redeployed for improved control and compliance.
Those CFOs who can improve their data management, including maintenance and organization-wide visibility, will be better placed to handle the challenging and unpredictable economic landscape (demand, inflation risks, etc.). This will also include issues such as Environmental, Social, and Governance (ESG) reporting and proof of due diligence, which will become increasingly important for companies over the next few years.
Initiatives focused on sophisticated ESG reporting and advanced technologies such as blockchain and predictive and prescriptive analytics are still in their early stages. However, use cases involving cloud technologies, automation, and basic analytics have increased significantly. There are growing opportunities for CFOs to leverage these new technologies to enable their organizations to achieve their sustainability goals.
3. Adopting a Hybrid Working Environment
The aftermath of the pandemic continues to change the way people work. CFOs have a role in helping their companies adapt to the hybrid environment and improve talent retention as labor shortages continue to bite. They can enable their teams and the organization to realize more significant productivity gains and employee satisfaction rates with location-flexible arrangements. Many are already employing digital tools to facilitate remote collaboration, virtual transitions, and robust network security measures.
4. Transforming Financial Planning & Analysis
Transforming FP&A has been on CFOs’ transformation radar for the last couple of years. However, it has now become an area with the highest active investments. CFOs must integrate new technologies such as data lake, artificial intelligence, and machine learning into their existing systems. As the business environment continues to throw up shocks prompted by geopolitical uncertainty and sector disruption, CFOs should ensure that, as well as technological evolution, change management becomes a culture rather than a one-off exercise.
The next few years will see the current economic challenges take hold, while the increasingly unpredictable business landscape might trigger new ones. However, those CFOs that take action now and leverage rapidly evolving technologies to ensure that their processes and systems are robust, resilient, and agile will enable their organizations to thrive and gain a decisive competitive edge.
Krishnan Raghunathan is head of finance and accounting services at WNS.