CFOs see a bright future ahead. More specifically, a large, global majority of finance leaders at midmarket enterprises expect their organizations to perform well in the coming year, regardless of economic uncertainty. They’re more optimistic than their large-enterprise counterparts, and many of them are making significant investments in skills and technology to elevate their businesses.
Notably, the CFOs who participated held an 80% confidence level that their organizations would hit their revenue and margin targets in 2023. And 75% of finance leaders are planning double-digit spending increases to drive growth.
“In a time when the sentiment of their larger-enterprise peers is clearly trending negative, the majority of CFOs from emerging and midmarket enterprises are taking bold steps so that finance functions as a dynamic capability that enables them, their teams, and their enterprises to do more and to perform better in the year ahead,” said Nick Araco Jr., founder of the CFO Alliance.
The findings from the CFO Alliance’s “2023 Global Mid-Market CFO Sentiment Study” come as finance leaders continue to focus on a variety of ongoing issues, with higher interest rates and the cost of capital ranking as the top risk-related concerns for 2023. Hiring or retaining talent, cybersecurity, supply chain disruptions, and loss of key customers round out the top five risks that are top of mind for finance leaders in the coming year.
The study—now in its 13th year and produced in collaboration with Workday—includes conversations with more than 450 finance leaders in nearly two dozen industries about their plans for the year ahead.
The study finds 38% of CFOs prioritizing budget increases for improving skills and capabilities, up from 34% a year earlier.
Preparing People for the Future
CFOs are looking to improve existing assets in smarter, more cost-effective ways rather than merely acquiring them, according to the study. One area where this applies is finance skills, where leaders are willing to invest in training and development.
Ensuring the finance function continues to have the right people in place remains a priority. But in a tight labor market, more emphasis has been placed on providing training for existing employees to expand their skill sets. The study notes that finance leaders are moving from talent acquisition to “talent optimization.” (Workday Co-Founder, Co-CEO, and Chair Aneel Bhusri has written about the importance of a skills mindset, driven by the power of artificial intelligence.)
The study found 38% of CFOs prioritizing budget increases for improving skills and capabilities, up from 34% a year earlier. At the same time, 28% of finance leaders identified hiring and compensation as a priority, down one percentage point from 2022.
Addressing gaps in finance expertise emerged as a top priority, with financial planning and analysis (FP&A) capabilities as one area CFOs seek to focus on. More than two-thirds of CFOs from emerging and midmarket enterprises lack dedicated FP&A talent, according to the study. Yet finance leaders also intend to improve data analysis skills without additional full-time hires.
The push to develop existing talent, according to the study, “is driven by the continued reality that, even in a softening job market, it remains difficult to acquire talent with the capabilities they need, particularly in FP&A and corporate finance.”
When it comes to systems and technology, 34% of CFOs in the study said they would implement new tools or upgrade existing ones in 2023.
When it comes to their own careers, CFOs are reevaluating their futures as well, with 18% of respondents saying they’re making a job move in 2023. Another 13% are considering consulting opportunities, while 5% say they’re changing careers altogether.
Asked about their biggest obstacles to achieving personal learning and development goals for 2023, a majority (63%) of CFOs said they’re “too busy with day-to-day responsibilities.” A lack of sufficient resources accounted for another 18%, followed by an inability to find “the right providers or resources” at 10% and “insufficient support from my leadership or enterprise” at 9%.
“As a result, more CFOs are burning out even in the face of good performance and a positive outlook,” the study found.
Redesigning the Finance Function for Growth
Managing costs alone isn’t enough. The CFO’s mandate increasingly includes value creation, which means taking steps to build better businesses in 2023.
Given the variety of challenges they face, finance leaders are taking action. “Most CFOs intend to realign priorities, reassess individual and team responsibilities, and refocus efforts on value creation,” the study finds.
Overall, more finance leaders appear to see their teams as a pace-setting part of the business. “It is clear that CFOs from emerging and midmarket enterprises from around the globe see finance functioning as a dynamic capability that enables their teams and enterprises to do more and to perform better,” the study said.
According to the study, finance leaders say they’re taking steps in 2023 to:
“Quickly redesign the work they and their finance teams do by applying technology to drive better outcomes and value.
“Better match critical skills to the work that needs to be done by them and their finance teams.
“Rigorously upskill the finance workforce and engage them in new ways of working.
“Proactively strengthen culture by meeting their finance team’s needs for collaboration, adapting physical and remote preferences, and contributing to a more consistent work environment.
“Dramatically transform their finance function into a more resilient and integrated function that better navigates the ongoing volatile and uncertain environment.”
More than three-quarters of respondents reported 5% or greater revenue growth (79%) and EBITDA (76%) in 2022 relative to 2021.
Integrating Technology to Boost Results
When it comes to systems and technology, 34% of CFOs in the study said they would implement new tools or upgrade existing ones in 2023. Last year, 37% of respondents sought budget increases for technology.
More than three-quarters of respondents reported 5% or greater revenue growth (79%) and earnings before interest, taxes, depreciation, and amortization (EBITDA) (76%) in 2022 relative to 2021. And looking to the future, an even greater percentage of finance leaders expected growth of 5% or greater in 2023: 82% expected to meet that revenue growth target and 89% of CFOs said their organizations would clear that EBITDA hurdle.
“While there is evidence of downshifting in sentiment regarding domestic and global economic outlooks, CFOs from emerging and midmarket enterprises are optimistic about their own enterprises’ ability to grow in 2023,” the study said.