CFOs facing economic headwinds as 2023 begins are keeping their focus on costs, looking to reduce discretionary spending as a potential recession continues to loom.
This does not mean initiatives like digital transformation have fallen by the wayside, however: CFOs continue to view digital transformation as strategically important for their businesses. “Irrespective of what's going on, it’s something that has to happen and still remains a priority,” said Marko Horvat, VP, research for Gartner, regarding how finance leaders are thinking about such initiatives.
A recent study by Gartner found planning and sequencing finance transformation as well as setting a finance technology strategy roadmap were both among the top ten priorities for CFOs moving into 2023.
But finance leaders are still facing challenges when it comes to moving forward with their digital transformation initiatives. There are definitely some cost and spending pressures associated with digital transformation, Horvat said. The “big challenge with CFOs is justifying the digital investments,” he said. “So how do you measure the digital return on what you're getting?”
Recession and tech spending trends
A coming recession could change finance leaders’ strategies when it comes to digital investments or tech spending. Though inflation dropped for the sixth consecutive month in December, according to the Labor Department, concerns about a recession in the U.S. — though a potentially mild one — still remain top of mind for both CFOs and other members of the C-suite. Inflation slowed to 6.5% in December, according to the Labor Department.
Spending on automation should be “all about value,” Christina Ross, CEO of FP&A software provider Cube said in response to questions about how financial leaders can think about their technology spending among current economic trends.
Automation “should be a money-saver in the short- and/or long term,” Ross wrote in an emailed response to questions. “Once a solution is implemented, it should save time and resources, while adding enough value to more than offset the cost.”
This doesn’t mean technology budgets will necessarily shrink in 2023, Ross wrote in response to questions. But what might occur is a redistribution of spending, with more investment in automation technology while at the same time, companies take steps to reduce the number of platforms they use, for example, Ross said.
Technology spend and the finance function
An economic downturn will create a need for finance leaders to prioritize spending, but digital transformation is something CFOs “consistently rank as being really difficult,” Horvat said.
Evaluating the results of one’s digital transformation efforts is a constant challenge for financial leaders, who must also deal with finding and retaining digital talent as well as aggregating all of the information one needs across their organization in order to build a technology roadmap, Horvat said.
CFOs currently are focusing in on the finance function when it comes to their digital transformation efforts, therefore.
“What they're prioritizing is really maturing that FP&A function, getting FP&A-specific tools to platform their planning and budgeting,” Horvat said.
Ninety percent of CFOs surveyed pointed to evaluating their finance strategy, scope and design as their top priority for 2023, according to the survey, while 83% pointed to planning finance transformation efforts.
It is also important to note that CFOs are personally involved in their organizations’ digital transformation efforts both broadly and within the finance function, Horvat said.
“I think a lot of it has to do with owning that strategy piece of it, to make sure that that it's advancing in a way that serves the interests of the organization,” he said.