Research
The CFO Agenda: 2024 Finance Key Issues
Expectations have never been higher for finance teams. In the face of continuing economic uncertainty – coupled with new and ongoing geopolitical events – finance teams are feeling increased pressure from business stakeholders. As experts predict a stall or slowdown for global economic growth in 2024, our findings from The Hackett Group’s 2024 Key Issues Study indicate that finance leaders have shifted their priorities for this year.
What’s changed
Like last year, at least one-half of finance organizations are supporting cost management and optimization, data enhancement, and digital transformation with major initiatives in 2024. The percentages of organizations with corresponding initiatives are quite low, however, particularly for business partnering and talent development, which will be essential to successful finance transformation.
Cost optimization is a persistent priority
Given the current economic mood, it is not surprising to see cost management’s importance rise from the bottom of last year’s top 10 list to the top of this year’s list. Finance must maintain ongoing financial operating discipline and ensure intelligent cost management – both for the function and enterprise.
Finance – like all selling, general and administrative (SG&A) functions and the enterprise at large – needs a deliberate, sustainable approach to optimizing costs, rather than one-off belt tightening. Cost optimization is difficult to sustain, and finance organizations will be wise to explore generative artificial intelligence (AI) as part of this deliberate and sustainable cost reduction approach. Although adoption is still maturing, generative AI has huge promise.
The cost of working capital continues to rise
With interest rates on the rise, with liquidity coming at a cost premium. At the same time, disruption and uncertainty do not appear to be easing. In response, finance must optimize working capital through continued strengthening of supplier payment terms where possible, inventory management, targeted collections, capabilities for enabling faster and/or easier payments, and more frequent monitoring of the accounts receivable portfolio. Organizations with strong working capital management capabilities will be best positioned to sense and react to changing demand signals and other sources of instability.
Critical performance improvements require good data and actionable insights
The ability to master data and turn it into timely, meaningful, and actionable insights is key to achieving many of the finance priorities. Many organizations, however, are not fully deploying data-related technologies that hold potential for significant improvement in actionable insights – limiting benefits to the enterprise. It is notable that these technologies fall short of expectations for many companies, with the percentage of executives who feel these technologies meet or exceed expectations down relative to last year’s study. Effectiveness depends on data quality, but the complexity associated with implementing these technologies prevents some organizations from realizing the benefits they expected at this point.
Due to enterprise growth focus, finance must actively support sales and profitability goals
In the Key Issues Study, 57% of executives across business functions said they are concerned about a recession in 2024. This sentiment is reflected in finance’s shift in focus – from supporting enterprise growth in 2023, to achieving profitability goals in 2024. Finance can be a catalyst for achieving both profitability and growth goals by modeling and evaluating portfolio choices, investment opportunities or impacts of pricing strategy, maintaining ongoing financial operating discipline, and ensuring there is financial capacity to fund growth. The ability to achieve other finance objectives, including enhancing data capabilities and business partnering, will be key to delivering.
Levelling up finance through digital transformation means creating scalable capabilities
Finance executives project spending on technology to increase, though by a smaller percentage than last year. Finance must continue investing in technology to reduce costs and create new capabilities through aggressive adoption of cloud, finance point solutions, generative AI, analytics, and other tools. As with data-related technologies, there is significant opportunity to expand adoption beyond pilot projects or small-scale adoption. For technologies other than core finance application suites, large-scale adoption remains low – with one-third or fewer organizations at that level.
Generative AI’s promise for finance operations
Generative AI is in its early days in finance, with only about one-third of finance organizations currently evaluating the technology – however, we do expect more organizations to begin doing so. Those that are evaluating generative AI consider the most promising opportunities to be in account-to-report, management reporting, and planning and forecasting processes – areas where easy access to accurate data can greatly enhance the effectiveness of personnel. Many also see an opportunity for using generative AI in business performance analysis.
Enhanced forecasting prepares companies for the unplanned and unavoidable
Finance must identify business risks and environmental shifts to properly address them. The Hackett Group’s 2023 benchmarking analysis found that management is 28% more confident in the reliability of annual forecasts produced by Digital World Class® finance organizations (versus forecasts prepared by the peer group).
Upskilling existing finance talent helps businesses mitigate worker shortages and skills gaps
While nearly one-half of executives across all business functions said they are concerned about skills and worker shortages, many respondents believe freezing hiring or reducing staff due to budget pressures is not out of the question. This may be prudent financially but could risk further exacerbating skills gaps, especially as more finance workers reach retirement age. Many studies have shown that it is more efficient to reskill/upskill current workers than to hire new talent. Finance must ensure that stakeholders understand the central role talent development plays in enabling major investments in technology and digital transformation.
Beyond a having a seat at the table, finance must influence the conversation
As finance looks to mature its capabilities and become a more integral source of intelligent influence, the Key Issues Study found that 53% of finance organizations still operate as either an administrator or efficient operator. Only about one-quarter of finance organizations act as a catalyst for change across the entire organization or as a valued business partner. One way to elevate stature as a valued business partner is to focus on providing meaningful, actionable business insight.
Finance must be front and center supporting regulatory compliance initiatives
This objective is new to the top 10 list and reflective of the increasing regulatory requirements that finance must be prepared to support. Finance plays a key role in ensuring the business is meeting both its regulatory and environmental, social, and governance mandates by educating and mastering the various compliance areas and asks. In the absence of having internal skills and maturity, we would expect partnering with appropriate third-party service providers to be a critical step for meeting compliance requirements.
Capital investment; optimized and tied to business objectives
Capital investment is new to the Finance Key Issues list and points to heightened attention around where and how organizations are investing. The current environment will require more discipline around allocation and deployment processes – both to increase certainty about the return on new investments and optimize the return on investments already made. Overall, executives showed high confidence in their ability to achieve this objective, but few (22%) have a major improvement initiative in this area.
Transform your finance capabilities in 2024; how are you meeting objectives today while positioning for success tomorrow
As economic disruption and potential geopolitical risk remain prominent features in the 2024 outlook, finance teams will need to adjust their priorities to ensure that they are able to support the success of their business stakeholders. We believe most finance teams can make meaningful progress toward achieving their priorities by focusing in five areas:
- Maintain and improve profitability through intelligent cost reduction, with a dual eye on growth and broader enterprise support.
- Fund and continue digital enablement, recognizing this as an enabler to business partnering and improved decision-making.
- Enable actionable insights and partnering to deliver meaningful and actionable insights to the business.
- Chart your generative AI road map, exploring opportunities to harness the potential of generative AI, especially in areas such as account-to-report, planning, forecasting, and reporting/analytics.
- Evaluate how to transform the finance operating model to reflect the changing nature of work that will be driven by the dual mandate of cost reduction, along with the expanding expectations of business partners.
Download the full report to learn more about the top priorities of CFOs for 2024, including managing costs, improving cash flow performance, ensuring reliable forecasting and upskilling talent to execute on digital transformation.
