CFOs are tasked with the overall financial health of an organization. Their work ensures that a company remains financially stable, even in tough economic times. In 2023, the CFO’s job will become even more complex as we face a possible recession.
News of a potential slowdown in 2022 led to inflation rates unseen since the early 1980s. While unemployment remains low and the federal government has taken multiple actions to prevent a complete economic meltdown, there are still numerous concerns that we haven’t yet found our way out of a tough spot.
The tech industry was the first to show signs of distress. Over the past few months, mass layoffs at some of the largest tech companies, including Meta, Twitter, and Amazon, have left many economists worried about what will come next.
During times of inflation, the first action governments usually take is to increase interest rates. In 2022, the government increased rates seven times, leading to a benchmark rate of 4.25% to 4.5% — the highest in over 15 years. Higher interest rates mean that the cost of borrowing will increase significantly for both businesses and consumers.
As a result, companies will find their traditional sources of financing more expensive than in the past. In some cases, it may become impossible to borrow money, making organizations more reliant on their savings and cash flow.
Of course, CFOs will be responsible for ensuring that their organization maintains enough cash on the balance sheet to support continuing business operations. Let’s take a look at what the CFO position will entail in 2023.
Calculating cash flow means affirming that an organization has collected enough money to cover its regular business costs like payroll, operations, and debt payments.
Organizations that don’t have a significant savings buffer to rely on will need to take a careful look at their cash flow to ensure that they can continue operating as a going concern. The CFO will be responsible for doing this, and they may need to engage in creative financing to see that costs don’t spiral out of control.
We expect a lot of conversations around the C-suite roundtable concerning business costs. CFOs will need to find ways to cut superfluous expenses in their organizations to make sure that they don’t have too much going out without enough coming in.
Business analytics and key performance indicators (KPIs) can provide CFOs with the insight they need to make quick decisions. All sorts of KPIs are available to assist with cash flow management, including:
Companies that don’t already have KPIs in place will be smart to shore up their measurements quickly. KPIs reduce a CFO’s reliance on monthly reporting, which often doesn’t finalize for several weeks or months following the end of an accounting period.
KPIs are beneficial because they give timely, current information that senior leadership can use to make informed decisions.
CFOs should examine their accounting and finance departments to identify the individuals best positioned to calculate relevant KPIs. Once they assign the duties to the right employees, CFOs should review the data regularly.
If a CFO notes a decrease in sales or collection of open receivables, they’ll need to connect with other executives to resolve the problem before it’s too late. The CRO, CMO, and CEO can assist in improving customer sales and collections to ensure that the company maintains enough money to sustain ongoing operations.
Finance and accounting have evolved over the past several decades. Gone are the days of lengthy month-end reporting and delayed results; today, companies expect their finance and accounting departments to know how the company performed immediately after the end of a period.
Companies are explicitly seeking talent in the area of forecasting and budgeting. Accurate forecasting can help CFOs make better decisions, allowing them to rein in excess spending during economic uncertainty and quickly adjust during recovery periods.
To cultivate better forecasting, employees need specialized business analytics and data analysis skills. Skills using data analysis tools like Python are also highly advantageous.
Another area that requires more expertise is international business. Many companies see the benefits of expanding internationally, but their domestic accounting and finance skills don’t necessarily translate to other countries.
Retaining talent from individuals who have experience both overseas and domestically will be of tremendous value in the years to come.
CFOs can better prepare their finance and accounting teams for the future by embarking on training and development initiatives. High-performing employees interested in leading the company can benefit from skills training in forecasting and international business.
CFOs can support them by offering them an advanced degree or certification program paid for by the organization.
Companies with a carbon footprint must comply with environmental, social, and governance (ESG) reporting requirements in the coming years. CFOs who place importance on developing their employees’ skills in these areas will reap the benefits, as they’ll be ready for the changes their peers aren’t.
Sustainability is critical to many organizations as they realize that a reliance on fossil fuels may be coming to an end. They’ll need to find ways to support their business that don’t have an adverse impact on animal ecosystems and the climate.
Understanding how their organizations can make changes to limit their impact on the environment while protecting their financial stability will likely be a regular conversation between CFOs and other C-level executives in 2023.
The responsibilities of a CFO used to be primarily limited to overseeing financial reporting and completing a budget for the upcoming year. Those duties have changed tremendously as more companies expand operations overseas and companies look to implement new ESG reporting requirements.
Going forward, outside of accounting and financial responsibilities, the CFO will need to consider the impact of a recession on their organization and make applicable changes to minimize the repercussions.
In 2023, CFOs should pay close attention to internal and external metrics and act quickly to keep their companies competitive during a challenging period.
Our hands-on CFO executive recruiters have experience working with private, public, pre-IPO, and non-profit organizations. Clients are typically $50 million in revenue to Fortune 1000’s or have assets between $500 million to $15 billion.
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