As outlooks on 2023’s economy continue to be mostly pessimistic among executives, major concerns surrounding the economy have resulted in CFOs finding ways to lower spending wherever possible. Things like inflation, labor quality, monetary policy, and sales revenue are concerns that resulted in CFO spending dropping 4% in Q3, according to a recent survey conducted by Duke’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta.
Data from the survey indicates that half (50%) of finance chiefs reported their net spending increased in Q4. As decreased spending and cost optimization remain top-of-mind for forward-thinking CFOs, findings from the survey may be a potential indicator of extensive cost-cutting measures further entrenching themselves within corporate allocations.
Concerns developing from economic projections have been consistently piling up for executives between Q3 and Q4 of 2022. Labor quality and cost pressures/inflation led the way for the firm’s most-pressing concerns, according to the data, and 15.8% of CFOs said that those two worries topped all others.
The biggest changes between the final quarters of 2022 occurred in concerns around monetary policy, rising from 5.8% in Q3 up to nearly 10% (9.2%) in Q4. Labor cost concerns also rose 2% among executives over the quarter, the second highest change between the two periods. Supply chain concerns among CFOs saw a slight drop, from 7.9% in Q3 down to 6.4% in Q4.
Findings reveal financial executives are increasingly thinking about cash flow, solving or overcoming their supply chain issues, and maintaining awareness of the labor market’s impact on their companies.
As the average CFO pay has dramatically increased over the past several years, few CFOs told Richmond Fed that they didn’t receive annual compensation increases. More than half (58%) of CFOs told surveyors that their company gives them annual increases in compensation that incorporates adjustments for rising inflation and cost of living.
Among those who don’t have annual compensation increases, 22% said their compensation increases were purely merit-based. Nearly a fifth (17%) of CFOs reported they had no annual compensation increases at all.
Despite a majority being compensated well, CFO confidence in their company’s ability to grow has dropped over the past 12 months. Findings indicate that revenue expectations have dropped 4.1% across the board. The largest drop in expectations (5.3%) occurred in employment growth, furthering the notion of finance executives planning to implement hiring freezes if their economic projections are correct.