The world of finance is constantly evolving, and this year is no exception. The new year brings fresh challenges for CFOs and finance teams, specifically around strategizing methods to minimize the pressures of recession and inflation. Keep reading to learn about these top challenges facing CFOs in 2023, as well as the steps leaders should take to prepare their organization and AP team for success.
The State of Finance Today
The current state of finance is dynamic as ever, rapidly evolving with new challenges and opportunities emerging every day. As the global economy recovers from the lingering effects of the COVID-19 pandemic, uncertainty remains high even amongst top business leaders. Geopolitical tensions, ongoing supply chain disruptions, and economic disruptions only add more fuel to the fire.
These circumstances have made the CFO role increasingly complex, requiring them to have a strategic, digital-first mindset and an agile methodology that can quickly pivot to keep up with the latest trends. With the rise of big data, cloud computing, and other digital technologies, CFOs must harness the power of technology to streamline processes, minimize inefficiencies, and inform their company’s overall strategy.
The rising demands for accurate financial data have also made data accuracy and timeliness more important than ever before. It’s now essential for CFOs to have a firm grasp on the latest tools and best practices in order to truly optimize their financial management strategy.
Top Challenges for CFOs in 2023
The top challenges for CFOs in 2023 include managing the risk of a recession, navigating persistent inflation, delivering successful digital transformation projects, as well as acquiring and retaining top talent. These challenges require CFOs to be agile, proactive, and thoughtful. Keep reading to learn about each of these challenges and how finance leaders can face them head-on.
According to Deloitte, “CFOs’ concerns over persistent inflation outweighed angst over the possibility of a recession nearly 3 to 1.” The unpredictability of inflation requires CFOs to embrace a more agile and flexible approach to work, which can be challenging for a historically traditional department. Right now firms are extremely risk-averse, with 62% of CFOs saying that now is not a good time to be taking greater risks. However, if teams are not confident in what is happening next with the economy, they are assuming major risks with an uninformed finance strategy for their organization.
Now it’s more important than ever for AR teams to be efficient, make sure that customers are paying on time, and ensure the company maintains a positive cash flow. Unfortunately, the current economic landscape makes that an uphill battle for most teams. AP teams and finance leaders are then dealt the challenge of deciding which vendors to pay, and when. This can be a daunting task without the right tools in place. AP automation solutions are one way to simplify this process. They empower teams to make better decisions by identifying strategic vendors and providing more visibility into the overall AP process.
Deloitte recently found that there is a 35% likelihood that the US falls into a recession during 2023. This possibility threatens to impact cash flow management and teams’ ability to deliver accurate forecasting and reporting. As a result, 52% of CFOs are prioritizing cost management to prepare for the year ahead.
To prepare for a potential recession, CFOs are focusing on managing operating expenses, controlling headcount, reprioritizing or deferring capital expenditures, and conserving or strengthening liquidity. CFOs must also determine ways to make their operations more efficient so teams can do more with less. As a result, many finance departments are embracing automation to fill this gap, with a special focus on accounts payable as the top priority. AP is a great start for finance teams looking to automate the back office because it helps teams to focus on what they can control, proactively communicate with suppliers, and establish accurate cash forecasting. All of these benefits help protect teams against long-term implications of a recession, including: damaged supplier relationships, cash flow problems, and diminished sales and profits.
Executing on Strategy
The role of finance is becoming increasingly strategic, requiring CFOs to lead a digital-first, agile organization. This degree of evolution is not easy. Teams must carefully plan their digital transformation approach by reimagining manual, paper-based workflows and retraining their workforce to assume higher-value responsibilities in their day-to-day tasks. With this, CFOs are concerned about realizing the projected value of these initiatives and properly guiding their teams into the future. Done right, they can unlock an incredible degree of success for their team and overall business. Done wrong, they could lose their job. Many CFOs aren’t up for the challenge of managing these efforts, along with the additional hurdles of the modern era, which has led to a recent increase in CFO turnover.
In order to properly execute their 2023 strategy, teams must have a clear understanding of their current standings. This is impossible when AP teams are consumed with menial tasks like chasing invoice approvals and answering a flood of vendor inquiries. This is likely why the majority of our webinar attendees last month reported that their top business priority for AP in 2023 is increasing operational efficiencies.
Recent inflation and the recession adds even more tasks to AP’s plate: recalibrating cash forecasting, reviewing pricing and margins, optimizing the supply chain, finding new suppliers, managing existing vendor relationships, as well as implementing cost-cutting initiatives with finance, operations, HR and others. In order for teams to deliver on the above, they must also ensure their financial data is accurate and up to date. This provides the clearest view of their financial position and ultimately guides decision-making on what matters most.
Unemployment rates are expected to rise from 3.6 to 5% in 2023 according to Deloitte, but this doesn’t seem to affect the job market for accountants. In fact, one of the biggest challenges facing CFOs in 2023 is talent acquisition and retention. Rising demand for accounting and finance staff is making it difficult for firms to attract and retain top talent today. In addition, AP staff were one of the finance jobs’ highest in demand in 2022. The rise in salaries and the shortage of quality AP staff compound the issue, making the fight for talent fiercer than ever.
According to a recent survey covered by CFO.com, 73% of respondents are having difficulty attracting employees, up from 56% in the first half of the year. Moreover, 70% of employers expect their hiring problems to persist into 2023. This dilemma, along with budget cuts, forces finance departments to rely less on adding headcount and explore other methods to achieve their 2023 output goals without burning out their existing team members.
As a result, many teams are turning to AP automation. In fact, 61% of teams who have implemented AP automation now process more invoices with the same size team. Embracing AP automation helps teams achieve their output goals faster, despite common setbacks like limited headcount or budget. It also provides a valuable opportunity to upskill existing talent to more strategic work. This approach kills two birds (efficiency gaps and employee engagement/retention) with one stone.
How CFOs Can Prepare for Challenges in 2023
In order to prepare for the challenges of 2023, CFOs need to take a proactive approach to future-proof their finance teams. This includes investing in the right technology and automation tools, using accurate financial data, and creating a company culture that reduces turnover and enables upskilling.
More specifically, CFOs should:
- Invest in the right technology and AP automation tools to minimize process inefficiencies and free up staff time to focus on high-value projects. This can help streamline their operations and increase efficiency.
- Ensure financial data is accurate and use it to inform their company’s strategy. This can provide a clearer view of their financial position and help guide decision-making.
- Create a company culture that attracts and retains great staff. This addresses the talent acquisition challenges and ensures teams have the right people in place to meet their objectives.
- Upskill staff to be as strategic as possible. This helps ensure departments are prepared to take on new responsibilities and meet the evolving needs of their organization.
“Organizations that maintained their innovation focus through the 2009 financial crises – including the adoption and use of new technology solutions – emerged stronger, outperforming the market average by 30% and continuing to deliver accelerated growth over the subsequent three to five years.” -McKinsey & Company, Innovation in a Crises: Why it is More Critical than Ever Before
Though 2023 is set to be a challenging year for CFOs, finance leaders can achieve success with a proactive and strategic approach to combat the uncertainty that lies ahead. The right technology, accurate financial data, and a strong company culture are all key for future-proofing organizations. This is where AP automation platforms like MineralTree come into play by supporting 2023 priorities via one unified workflow
MineralTree can help CFOs meet challenges by providing a comprehensive AP automation solution that streamlines the end-to-end accounts payable process and reduces the burden on the finance team. With MineralTree, CFOs can focus on more strategic initiatives, attract and retain top talent, and realize the value of their efforts. Find advice on our blog about how to structure your AP department for today’s business environment, how CFOs can better prepare for digital transformation, and more. You can also request a free demo today to see just what MineralTree can do for you.