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American finance leaders shift to defence mode

US corporate finance leaders have firmly pivoted their focus from revenue growth to cost control as they navigate through an uncertain economic environment and rapidly changing business landscape, according to the 2023 U.S. Bank CFO Insights Report.

The survey of more than 1,400 senior finance professionals nationwide revealed that the top two priorities are cost controls within the finance function – up from the eighth highest priority in 2021 – and cost controls across the entire business, a shift from 2022. Meanwhile, driving revenue growth has been deprioritised compared to 2021 when it was a top priority for finance leaders.

“CFOs have positioned themselves decisively in defence mode,” commented Stephen Philipson, head of Global Markets and Specialized Finance at U.S. Bank. “With the end of the low-cost capital era and inflation still uncomfortably high in some parts of the economy, finance leaders are taking control by driving efficiencies in their organisations.”

Rising risks

The survey found that, while still not a top risk, rising interest rates jumped from the least concerning risk last year to the middle of the pack this year (23%). Similarly, regulatory changes (25%) moved up in the risk rankings this year.

Finance leaders ranked talent shortage (43%), pace of technology change/digital disruption (40%) and high inflation (38%) as the top risks facing their businesses. California finance leaders said high inflation is their top business risk, much higher than finance leaders nationwide.

Only one-third (33%) of finance leaders are more than somewhat confident in their company’s ability to manage inflation risks. Just 6% are highly confident.

Cuts versus growth

Cost cutting and driving efficiencies within the finance function is the top priority for US CFOs (38%). This compares to 30% in 2022 and 23% in 2021. Meanwhile, the same approach of cost-cutting and driving efficiencies, but this time across the business as a whole, is the second highest priority (33%).

The survey found that driving revenue growth was the fifth-highest priority (23%), up slightly from 2022 but down from the second-highest priority (35%) in 2021.

More than half (56%) of finance leaders admitted that they currently struggle to balance cost-cutting and building resiliency with investment in future growth, up from 46% in 2021.

Areas for efficiencies

Despite the increasing need to control costs, CFOs are not turning to layoffs, as the competition for talent remains tight. Only 19% told this year’s survey that they plan to reduce headcount, compared with 40% in 2021.

Instead, CFOs ranked investing in technology to cut costs as their main priority, followed by restructuring their workforce and outsourcing business functions and processes. Data analytics (53%), artificial intelligence (52%) and cloud computing (48%) are the top priorities for technology investments.

Within the healthcare sector, about six in 10 believe AI could completely redefine how the finance function is operated. In other sectors, it was only about half of finance leaders.

Increased appetite for digital payments

Appropriately, in the launch year of the FedNow Service, more than two-thirds (68%) of respondents said they intend to use instant payments two years from now. The survey found that 42% currently use real-time payments, up from 38% in 2022.

Respondents from consumer and retail (56%) and hospitality and leisure (54%) were more likely to say they used instant payments today than industries such as oil and gas (34%) and aerospace and defence (30%).

Improved working capital (46%) resulting from faster payments processing and improved customer and supplier experiences (43%) are the two primary drivers for the adoption of instant payments.

About the research

The results of this research are based on a survey conducted by FT Longitude on behalf of U.S. Bank. The 1,420 senior finance leaders surveyed work at US businesses across multiple sectors. Half of the survey participants are group, regional or divisional CFOs. The remainder are senior managers within the finance function. Every surveyed finance leader works for a business that generates at least US$100m in annual revenue, and 39% for a business that generates more than US$1bn.

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