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Recent challenges in finance, courtesy the pandemic and the war in Ukraine, have cemented the values of agility and prudence. The chief financial officer (CFO) stands in the eye of this storm – analyzing organizations’ strengths and weaknesses, tracking cash flow, and dealing with financial planning.
The role of the CFO cannot be overstated when it comes to tackling the financial challenges expected in 2023. CFOs are accountable not just to their companies, but to various regulatory authorities and entities, including (in publicly held companies) the Securities and Exchange Commission (SEC).
Since they both oversee financial activities and strategically advise C-suite peers, it is crucial that they remain up to date on the most current challenges in the financial sector as well as the ways to tackle them.
In 2023, we can expect evaluating financial strategies, design and scope to be the top priority – or at least one of the top priorities – of CFOs. This is as per a survey in November 2022 by Gartner.
CFOs are likely to be even more thinly stretched than usual across many activities this year. Many are planning to significantly involve themselves in tasks that are not in their top few priorities.
That being said, priorities for CFOs in 2023 range from communicating with the board to remodeling and redefining the ways in which finance supports business.
The Financial Challenges of 2023 – And How to Deal with Them
Here are the 5 most significant challenges expected for CFOs this year, and what can be done to overcome them.
1. Incorporating Operational Insights in Forecasting
Forecasting needs to be both accurate and fast, so that issues can be identified before they snowball into more significant problems. For this, CFOs can incorporate operational insights into financial forecasting.
Developing more reliable forecasts will require certain criteria, including but not limited to:
Automating the forecast
Using various external and operational inputs
Building a market-momentum case that uses end-market trends as well as external and internal data to set targets
These criteria will help you to make better data-driven business decisions.
2. Overcoming Economic Instability
With recent challenges in finance, including rising inflation, unstable markets, the spectre of recession, and cybersecurity problems, CFOs need to prepare appropriate risk management plans.
They will need to focus on developing predictive models and strengthening scenario analysis capabilities in order to gain faster and more efficient responses. This will help the business in progressing towards their long-term growth goals.
For scenario planning, CFOs can model the possible impacts of market risks by using a more data-driven and flexible approach.
3. Restructuring Finance
While CFOs do not usually involve themselves closely in digital transformation strategies, the strategic importance of digitization must be recognized. Of course, leading digital transformation is no easy task – achieving it quickly in times of economic turbulence even more so.
Tech adoption was already on the rise, but the Covid-19 pandemic accelerated it. As automation technologies mature and their advantages come closer to the spotlight, CFOs recognize more and more the operational efficiencies of digital transformation.
Take CrushErrors, for example – a patented artificial intelligence (AI) solution for the otherwise tedious, time-consuming task of reconciliation. The software imports data from Excel and SAP and reconciles differences in ways that are impossible with other products. It is such automation technologies that are revolutionizing the finance industry and addressing some of the major challenges in finance.
According to a 2021 report by Accenture, 60% of finance tasks are automated, compared to only 34% back in 2018. This number is only set to grow.
It is expected that many, if not most, CFOs will maintain or increase digital investments throughout this year, regardless of inflation. As businesses flail and struggle, every cent saved by lowering the time and costs involved makes a difference.
4. Hiring and Retaining Talented Employees
Hiring and retaining talented staff is projected to be one of the major challenges for CFOs in 2023. The labor market has remained challenging for some years now, and is unlikely to change this year.
Competitive salaries are, of course, one of the major perks that employees search for. But supply chain disruptions and inflation will impact profitability and make offering such salaries more difficult.
Note that it’s not just salaries, especially if you want to hire and retain younger workers. In the wake of the pandemic, attitudes towards work have shifted, and workers put more emphasis on a decent work/life balance. Hence, company policies must meet the needs of the modern workforce.
CFOs will need to coordinate with HR to find more effective ways to find and retain talent, particularly for critical roles. Hiring the right people will help companies to meet their long and short term goals more easily and effectively.
5. Preventing Revenue Leakages
Not even the most bleeding-edge technology can guarantee the survival of your company if you run out of cash. Unfortunately, during economic slowdowns, cashflow can determine which companies founder and which ones remain afloat.
As per the 2022 SaaS benchmarks report, businesses with over 25 months of cash runway are cutting the same amount as companies with less than a year of cash runway. Even as businesses brace themselves and gear up for future economic turmoil, maximizing cashflow will be one of the highest priorities for CFOs in 2023.
Tightening your purse strings is not a bad solution in of itself. But it could also be helpful to analyze your accounts receivables management. There may be revenue leaks in your billing process, whether due to manual error or malfunctioning tech.
To tackle payment failures and reduce collection costs, CFOs can invest in intelligent dunning systems and integrated billing and receivables systems.
Financial risk management, leveraging technologies, and maintaining communication and coordination across relevant teams are all aspects of being an effective CFO in 2023. There is a lot on a CFO’s plate – that’s why hiring NextGen Accounting will ease their workload and allow them to focus on more important tasks.
We offer credit card reconciliation services, bank reconciliation services, audit and anti-fraud assurance, financial reporting, and consulting services. Our services are specially tailored to firms with vary large amounts of data that are extremely difficult to reconcile.
To give you the most accurate and fastest reconciliation, we use our patented software CrushErrors, which you can also obtain as a product if you’d rather conduct reconciliations in-house.
NextGen Accounting’s management team has decades of experience and includes former executives of Barclays Bank, Bank of America, and ICBC. Contact us today for reconciliation services or book a free demo if you’d like to get CrushErrors!