Cost containment and cash flow optimisation and increasingly under the microscope

Finance leaders are battening down the hatches in preparation for a potentially rough 2024, putting cost control and cash flow optimization front and center, according to new research from The Hackett Group.

Their annual survey of over 375 CFOs, controllers, treasurers and other finance executives found shifting priorities in response to a “perfect storm” of economic challenges. With inflation reducing purchasing power, interest rates continuing to rise, unpredictable supply markets, and no end in sight for geopolitical conflicts, companies are laser focused on conservation.

“Last year, growth was the clear top priority for finance leaders. But concerns over the global economic climate have driven a significant shift in their thinking,” said Senior Research Director Shawn Fitzgerald.

“Growth didn’t even make the list this year, and cost containment and cash flow optimisation jumped from the bottom half of last year’s list to the top two spots for 2024. Profitability goals and margin expansion also moved into the top five.”

Instead, the list is dominated by traditional finance goals like improving forecast reliability, regulatory compliance, capital allocation, and expanding profit margins. But with little wiggle room in the budget, achieving these goals will be difficult.

Making matters worse, finance teams are bracing for a 5% increase in workloads at the same time that staffing and budgets shrink.

The path forward lies in technology, according to the research. Finance plans to increase spending on digital transformation and believes innovative tools like robotic process automation (RPA), artificial intelligence, and even nascent generative AI can help close the productivity gap.

Tom Willman, Principal at The Hackett Group, was particularly bullish on generative AI based on its potential impact. “Finance organisations would be wise to explore generative AI as part of this, as it holds huge promise,” he said.

“Our recent research finds that generative AI could enable finance and other selling, general and administrative functions to reduce cost and staffing by up to 40% over the next five to seven years. Now is the time to be planting the seeds for this potential paradigm shift in delivery model and cost structure.”

But finance leaders expressed less confidence in achieving key objectives like forecasting, digital transformation, and upskilling talent in 2024 versus other priorities. The breakneck pace of change could be leading to some trepidation.

“The solutions to their problems lie in these very areas they lack confidence in,” Willman conceded. “It’s unclear if they can upskill talent rapidly enough or architect complex digital solutions fast enough to match the building economic storm. Either way, it sets up a turbulent 2024.”

By keeping costs down, optimizing cash flow, and accelerating modernization, finance hopes to help companies stay the course through stormy seas ahead. But with clouds darkening on the economic horizon, finance leaders are firmly in conservation mode to weather whatever storms may come.

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