Without a doubt, the biggest economic challenge that every CFO will have to face in 2024 will be maintaining financial liquidity. According to the report by KPMG and the CFO Club („A modern CFO in a transforming company”), based on a study from October 2023, CFOs will encounter price increases, the search for competent staff, decisive changes in the field of digitalization and ESG reporting.
The study in question involved 49 large (mostly employing 250-3,000 people) enterprises from the following sectors: production, service and trade, with revenues including: PLN 100-500 million or above PLN 500 million.
Will we see price increases in 2024?
Maintaining financial liquidity in such unstable economic times is quite a challenge. It cannot be denied that strategic decisions of enterprises in the field of financial policy are formed by, among others, inflation, energy prices. To save the situation, CFOs should pay attention to effective working capital management and obtaining additional financing – this could be achieved with pay raises. The report by KPMG and the CFO Club clearly shows that the majority of surveyed financial directors (49%) are considering a large increase in prices for services – up to 10% (or more). Only 39% of surveyed CFOs declared maintaining prices at 2023 levels.
We cannot forget about the level of margins, which influence the profitability and competitiveness of the organization on the market. Here the situation is the opposite. An increase in margins is expected by 27% of financial directors. The majority (over 60%) declared their willingness to maintain the margin at a similar level as in the previous year. Margin reduction is rare.
Employees with high competences – a necessity?
The priority of every CFO should also be to support and develop employee competences – including: learning to use financial tools based on new technologies. However, the prospects are not very positive.
As many as every second financial director (55% of respondents) showed that the staff in their companies has clear gaps in the desired skills and competences. There is a need to train current employees and successively employ new, suitably qualified employees. However, finding a specialist in a given field is not that easy – as many as 72% of CFOs complain that it is a big challenge, and over 50% of financial directors emphasize how problematic it is to retain a professional in the company.
Automation of business activities – nothing can do without it?
The report „A modern CFO in a transforming company” shows that there is a huge competence gap in the area of technology and IT – therefore, it should be a development priority in almost every organization.
Technological progress and digitalization can increase rapidly with several investments:
- in new tools and IT systems,
- in the development of employee skills (preferably in the field of digital finance).
The prospects here are quite optimistic. The automation of financial functions in companies has already started and is progressing rapidly (changes were declared by as many as 43% of surveyed CFOs). But this is just the beginning. However, there is still a lot to do and realize. This can be seen in the example of using data storage systems.
Has digitalization reached every company? Disturbing results
Efficient communication between the financial department and other departments of the company is an aspect that cannot be underestimated. The level of commitment and quality of this cooperation is influenced by, among others: how data is collected, stored and used. As it turns out, digitization and technological progress in this category have not made themselves felt everywhere – according to the report by KPMG and the CFO Club, as many as 1/3 of the surveyed enterprises still practice manual storage of accounting data. This is a surprisingly high response rate. A very small proportion of financial directors confirmed that their organizations had an advanced reporting system. Only 12% of companies demonstrated a BI solution and redefined automatic reports (based on the general ledger).
Among enterprises that have decided to use modern IT technology to store data, the most popular are ERP solutions (88% of respondents). Most CFOs no longer use Excel – they more often choose tools such as Hyperion, SAP, Tagetik. However, ERP class solutions are not sufficient for proper financial analysis, financial planning and preparation of many budget iterations. CPM (Corporate Performance Management) tools, which are becoming more and more popular, are used for this purpose.
What may be disturbing is the fact that still more than half of enterprises have not integrated systems – indeed, they have not even created a common data access point. Moreover, 14% of surveyed CFOs from this group do not plan to take steps in the future that would change this state of affairs.
Duration of financial plans in 2024
Financial planning today looks much different than it did a few years ago. Digital transformation allows you to gain access to new business models – those that improve customer service and strengthen the innovativeness of operations.
The technology has not reached all enterprises. Only 16% of surveyed CFOs believe that financial planning in their organizations is fully automated and fast. The rest of the companies had nothing to brag about. 43% of CFOs emphasized that the financial planning process in their companies takes far too long. Another 33% indicated that the duration needed to be slightly – but still – shortened.
What about ESG reporting? Is this a priority in 2024?
ESG reporting is a special type of non-financial report in which companies present activities that correspond to non-economic development indicators – related to environmental protection, social issues, management.
The report „A modern CFO in a transforming company” also aimed to examine the level at which individual organizations have implemented ESG reporting practices. The results were surprising.
As many as over 2/3 of CFOs admitted that their companies ignored the issue and no ESG-related actions have been implemented so far. In this group, 35% of enterprises are planning to include non-financial reports in standard procedures. Another 39% of CFOs had no hesitation in emphasizing that ESG reporting was not of their interest – until it affected them. Only about 30% of companies attach great importance to non-financial and ESG reporting – even when they are not subject to legal requirements.
Summary
The CFO will be extremely busy in 2024. Maintaining financial liquidity is related to a number of factors – ensuring qualified staff and complete automation in the company. The digitization of individual company departments will affect, among others: for faster financial planning. Most likely, there will be a larger or smaller, but still, price increase. Most CFOs downplay the issue of ESG reporting, which does not bode well. Sooner or later they will have to encounter these EU requirements. Lack of prior preparation to know this topic may adversely affect the results and correctness of the ESG document.