Finance leaders have had much to consider when forecasting for 2024. Bank failures, geopolitical turmoil, and a hawkish Federal Reserve gave companies reason to prepare for the worst at points in 2023. But the outlook for the fourth quarter and much of 2024 is surprisingly bright.
Although globally, the economy is “limping along,” according to The International Monetary Fund, the IMF upgraded its growth forecasts for the U.S. this week. It expects the U.S. economy to grow 2.1% this year and 1.5% in 2024, up from forecasts of 1.8% and 1%, respectively, three months ago.
The Grant Thornton survey data suggests that CFOs may be willing to push their risk tolerance to be better positioned for this apparent “soft landing” of the U.S. economy.
According to the Q3 2023 GT CFO survey, more than three-quarters (76%) of CFOs said they’re aiming and ready for net profit growth over the next 12 months. That figure was just under 70% in Q2, going as low as 60% in Q4 of 2022. While finance chiefs’ confidence is nothing new, surveyors believe CFOs are ready to see adjustments they made in a post-pandemic marketplace finally pay off.
“When the cost of capital was essentially free, you could keep inventory levels high at very little cost,” said Grant Thornton’s Sean Denham, the firm’s regional managing partner for the Atlantic Coast. “That shifted when interest rates increased, and with inventory levels dwindling, more supply chain issues started occurring.”
Now, with the adjustments made to counter the challenges rising rates brought, more than half of CFOs (52%) expect their profits to increase as much as 5%.
Artificial intelligence (AI), as demonstrated at recent CFO Leadership Council events, is a focal point of CFOs who are thinking about the operations of tomorrow, and incorporating AI is seen as part of the solution to automating the redundant parts of finance.
“AI’s popularity is growing quickly,” Paul Melville, national managing principal in Grant Thornton’s corporate finance group. “It’s on the news every day of the week. You can’t pick up a newspaper without seeing an article about AI.”
Now that CFOs are more comfortable with supply chain and workforce issues than they were six or nine months ago, “they’re looking at how they can drive the business. And they’re focusing on tech upgrades to deliver return on investment,” Melville said.
Financial forecasting is now occurring weekly at a significant number of organizations. More than one-third (36%) of CFOs told Grant Thornton their FP&A teams alter their forecasts at least weekly.
As forecasting frequency increases, finance teams are examining new technologies to improve the the quality and timeliness of their data. Within the next 24 months, 70% of CFOs said they will lead teams who use AI, distributed ledger or blockchain technology, machine learning, optical character recognition, and/or robotic process automation to assist in forecasting duties.
“CFOs are more bullish about their own organizations. They’re still managing costs and focused on cost reduction, but they’re spending money on growth,” said Denham.