- Costs are staying top of mind for financial leaders as they continue to navigate a tricky economic environment, with CFOs ranking cost optimization as their main priority for the fourth straight quarter, according to a recent study by Grant Thornton.
- CFOs are also growing less confident in their ability to meet their organization’s goals when it comes to controlling their costs, with that number falling by 9 percentage points from the previous quarter to reach 50%.
- Finance leaders facing an unclear economy environment are still “looking down the road — they want to be cautious, they want to be conservative,” Sean Denham, national audit growth leader for Grant Thornton said in an interview. “It's always good to be cost conscious.” Still, many CFOs are reporting optimism, he said, which follows as a potential looming recession stays looming. Many companies are still setting their eyes on growth, and “they believe they're going to have improved profits going forward,” he said.
CFOs who believe their organizations will see a rise in net profits surpassed two-thirds of survey respondents. This comes as 53% of CFOs said they feel optimistic about the economy, according to Grant Thornton.
However, the survey was recorded prior to the high-profile collapses of both Silicon Valley Bank and Signature Bank, failures which reverberated through the banking industry and highlighted the importance of prioritizing cash and keeping communication open among their teams for CFOs.
The failures of the two banks may not have affected CFOs’ sunnier outlook, Denham said, noting that “anytime there's a trigger of anything in the economy, there’s a reflection point and a pause. That was another pause.”
“I don't think it was as much on, how is this going to affect the general economy?” he said regarding how companies and their CFOs thought of the bank failures. “I think it was a more of a reflection on, ‘Okay, where's our money? What banks are we in? Are we safe? Do we need to think we need to diversify or not?’ And then I think they moved on.”
While larger ripples from SVB’s failure may be abating, CFOs are still keeping their eyes focused on ensuring they are optimizing costs for what they do think will be a bumpy, if ultimately profitable year, according to the survey.
One way finance chiefs may look to pare down expenses is by culling technology spending: technology investments saw a double-digit uptick as an area for potential cost cuts, according to the survey, coming in as the second most popular space to reduce spending following vendor or supplier costs.
A weakening economy is causing many leaders to become more discerning when it comes to their technology projects even as emerging technologies like artificial intelligence gain monmentum.
Worldwide IT spending will begin slowly inching downward, an April report by the International Data Corporation predicted, with the group lowering its growth forecast for the year to a 4.4% rise or $3.25 trillion. This is down from the 6.0% growth swing IDC predicted last October.
Notably, the areas where spending will most likely trend down include hardware and non-cloud technologies, IDC said, with demand for cloud and related infrastructure tools remaining strong.
Gartner also predicted software spending will remain strong in 2023 in a report earlier this month, with leaders prioritizing automation, increased productivity and other digital transformation initiatives that can provide their companies with competitive advantages in a murky economic future. Worldwide IT spending will reach $4.6 trillion, a 5.5% jump from 2022, Gartner forecast.
Still, digital transformation remains a priority for many financial leaders — those with projects already in the works are staying the course, Denham said.
“We absolutely have seen companies from a technology standpoint defer implementations and it really kind of depends where they are in their lifecycle,” he said. “If there are 75% in they're not deferring those costs, they're not delaying notice. But if they're in the assessment stage, if they're in the evaluation stage...they are putting those off.”