- CFOs facing economic headwinds are keeping a tight grip over their budgets, but many plan on increasing spend if needed in key areas including sales, corporate IT and supply chain, according to a Gartner study released Wednesday.
- Sales are the top area most likely to see higher budgets, with 73% of the 300 CFOs surveyed reporting they are planning to up spend in this area, according to the study. About half of them are planning to increase their sales budgets by 10% or more.
- However, this does not mean finance chiefs are automatically giving sales new funding, said Alexander Bant, chief of research in the Gartner finance practice. CFOs “really want to see chief sales officers or chief revenue officers driving productivity of their staff in this environment,” Bant said in an interview. “So thinking through, how are we removing and replacing low performers in the organization? How are we rethinking the mix of live versus remote sales interactions that we have? How are we shortening pipeline?”
Facing a still rocky economic outlook, CFOs and CSOs must work together carefully to ensure the business is allocating funds where needed.
CSOs want to be sure they have the resources they need to meet their targets, but CFOs are under increasing pressure to keep spending lean — meaning they are looking to ensure those goals are realistic before taking the steps to shell out further funding, Bant said.
The most successful CSOs “are being really smart about how they're allocating resources and driving productivity of their teams knowing that the better they can do that, the more likely it is that CFOs will increase their funding later in the year,” Bant said.
While the pace of inflation has slowed — the Consumer Price Index increased by 6.4% last month, a small step back from the 6.5% increase seen in December — it has not yet done so to the satisfaction of the Federal Reserve. The Fed remains committed to bringing inflation down to their 2% target, with several officials stating they will remain prepared to continue hiking up interest rates.
Inflation also remains a top concern for CFOs, with 77% of finance chiefs in a recent FTI Consulting survey stating this is still the number one challenge they are facing in 2023.
While CFOs want to be sure they are setting realistic sales targets, they must also keep a close eye on the economic environment to ensure they do not to miss their window — what they don’t want to do is “turn the spigot back on for funding sales too late in the recovery” of the economy, Bant said.
However, it is still unclear how long an economic downturn will last, making it likely an increase in sales spend will probably occur in the latter half of 2023. When CFOs move to up sales spend will depend on the actions of the Federal Reserve and how long economic headwinds continue, Bant said.
“CFOs are taking it literally month by month and the minute we start to see us turn the corner on the cycle, they will spend very aggressively in the sales function in order to start capitalizing on any growth on that turn in the business cycle,” Bant said.
If conditions remain tight throughout 2023, however, CFOs will continue to be more conservative with their spend, he said.
Following sales, CFOs are planning for increases in corporate IT and supply chain, with two-thirds of finance chiefs planning on bumping up their IT spend in this category. Meanwhile, 61% stated they were planning increases in their supply chain budgets, though at a more moderate level than that of IT or sales, according to the study.
When it comes to corporate IT, CFOs are looking to projects that can drive profitability and cash flow in the near-term, Bant said, as opposed to the era of pre-pandemic investing in projects with longer or more uncertain payback.
“Now, CFOs are under pressure to drive profitability and improve margins in the near term, so they're looking for digital projects that they know will have a tie-back to that,” Bant said.
This could include things like bumping up Salesforce productivity, improving processes or taking steps to accelerate “key, stable parts of their business,” he said.