2022 was a year of upheaval and transformation for UK businesses, with CFOs playing a central role in navigating these changes. 2023 promises to be similar in this regard. There will be significant challenges for finance teams to overcome. But there will also be major opportunities for them to boost their productivity and profitability. So, what are the most important factors CFOs will need to be aware of in 2023?
Poor economic conditions will likely persist this year, with inflation rising and the continued impact of the recession. There may be a ‘cost of living crisis’, but this also means there is a ‘cost of doing business crisis’. With suppliers, landlords, and energy providers increasing their rates, and employees demanding higher wages too, businesses will be stretched thin in terms of cash flow. There will be an increased pressure on CFOs to find ways to cut costs.
But they shouldn’t make the mistake of cutting costs in the wrong ways. Laying off talented employees or sacrificing technology may lead to short-term gains, but this will be detrimental in the long run. They should instead look to find new revenue streams and streamline inefficient processes (to eradicate unnecessary spend). They’ll need to lean on their finance team for this to analyse financial performance in greater detail.
As seen from the responses in our Finance Trends Report, there’s a great appetite among finance professionals to get more involved with business strategy. But there’s also a necessity for this too. We saw during the pandemic that, during those tough times, the CFO’s expertise became crucial for the CEO. The same is true within the current economic climate, and the board of directors will need to be fed highly accurate data from the finance department to drive their decision-making.
Continuous accounting is a modern method whereby financial professionals analyse performance daily. Traditionally they would have waited until month-end (or year-end) to assess how things are going. This is a very backward-facing approach though, as it’s looking at information that is out of date and therefore too historic to have a meaningful impact. Finance teams today must be forward-facing, making accurate forecasts to keep the business secure. To embrace continuous accounting, they will need instant access to both top-level and granular performance data.
Many will have put Making Tax Digital to the back of their mind, assuming it has been and gone. But this legislation remains relevant as there are still deadlines on the horizon. With any financial regulation it’s important to stay in the loop throughout its lifespan, as things can change in the blink of an eye.
UK SOX is another legislation financial professionals should keep an eye on. Its purpose is to enhance controls around reporting/auditing, thus increasing accountability and minimising fraudulent activity. It can be a challenge for CFOs to keep up with all the emerging legal requirements, but it’s something they must prioritise if the business is to maintain compliance, uphold a strong reputation, and avoid hefty fines.
Another insight to come from our Trends Report was that 40% of finance professionals believe AI will make crucial business decisions by 2030. But interestingly, only 19% think technologies such as automation will positively impact the workplace. This opinion probably comes from a place of fear, as many people worry automation will replace them.
But finance teams must leave manual admin tasks behind if they are to become a strategic powerhouse. And these are exactly the kind of tasks automation will take care of. Many companies now utilise tools such as automated reporting, so CFOs must embrace these innovations if they want to save time and keep up with competitors. It will likely be a long while before AI can fully replace creative and analytical jobs, and by then new roles will come to the fore, enabling finance employees to further their careers.
Digital skills gap
Digital transformation is a no-brainer when you consider the associated benefits and the drawbacks of standing still. But when CFOs implement systems such as Cloud-based accounting software it creates a unique challenge. If implementation isn’t completed in tandem with sufficient training for employees, there will be a gap between their existing skillset and the skillset needed to be competent.
There’s also the danger of a generational gap in businesses today. Gen Z have been raised in the digital age, but finance leaders shouldn’t assume all their employees are savvy with the latest software. They should provide the relevant learning opportunities needed to bring everyone up to speed. Using Cloud technology can help with retaining talent, as it enables remote working (which is in line with the latest employee expectations). But without sufficient training, finance professionals will likely feel unfulfilled and underutilise the new system.
Unfortunately, the climate crisis isn’t disappearing anytime soon. There’s an ever-increasing pressure on companies to be as green as possible. CFOs must think seriously about the impact their finance team has on the local community and wider environment. This is where ESG (environmental, social, and governance) initiatives must come into play. Going forward, there will be stricter government policies around the likes of carbon emissions, so finance teams must find ways to be sustainable.
Not only is there a moral obligation for businesses to be green, but it makes financial sense too. Sustainability goes hand in hand with efficiency, and often represents the pursuit of zero waste. If minimal waste is being produced, it means time is being spent wisely, resources are being used to the maximum, and processes are streamlined, all of which lead to lower costs. And there of course reputational benefits that come with being environmentally friendly, which is crucial considering many employees, suppliers, lenders, investors, and customers will use ESG credentials as a measure of who they should partner with.
If you’d like to stay up to date with the latest finance trends throughout 2023, be sure to follow our Financial Management LinkedIn page. If you’re looking to overcome the challenges highlighted above, take a closer look at our Cloud-based accounting software, which reduces your carbon footprint, incorporates the latest legislation, boosts efficiency, and improves strategic decision-making.