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Ebook
CFO STATE OF THE MARKET 2023
Discover the top challenges and trends affecting CFOs today, and gain valuable insights to help your enterprise adapt to rapidly changing scenarios on the fly.
Table of Contents
FOREWORD
By Chloé Giraut, Head of Finance at Pigment
The current economic situation is unprecedented – but I know this is nothing you haven’t heard before.
Our economy is facing an imminent recession, with global markets already under immense strain from the shifting global political and economic landscape. Companies everywhere are rethinking priorities and building larger moats to guard against challenging times.
As CFOs, we’re under dire pressure to be agile, make wise investments, and help our companies ensure profitable growth.
I also believe the onus is on us to encourage proactive spending habits while still making sure that we stay within budget.
This means shifting our focus from traditional financial reporting towards a finance function that actively drives the company’s strategic decisions.
It has never been more urgent to embrace technology and use it to our advantage.
And that is where my hope for the future lies – in the tools and technologies enabling finance teams to embrace integrated business planning, scenario analysis, and the overall movement towards forward-looking roles that add true value to the organisation.
Balance Sheet’s State of the MarketCFO Report is an important one, because it illustrates with data the ufterly inspiring optimism held by my peers.
Within this report, you’ll find reluctance to cut aimlessly, eagerness to grow sustainably, and – best of all – a readiness for what is to come over the next 12 months.
With this report as a guidebook in hand,I hope that you will emerge stronger than ever before, ready to seize any potential opportunities with sound strategies backed by data. Only then will you be able to truly become one of today’s new superheroes; CFOs who are able to lead companies through these trying times with agility and foresight despite all odds against them!
02. Plans for 2023
18% of respondents are looking to reduce headcount,
but a deeper look at their other answers paints a picture of particularly hard-hit outliers – many of which grew too fast, following a pandemic boom – or companies taking advantage of a fairly forgiving fat-trimming environment to get rid of underperformers. On top of this, many may have found themselves with more cash than anticipated after churn levels defied expectations last year.
Just 14% of CFOs we asked lost more customers in 2022 than in previous years.
Obviously a business’s approach will be driven by its own unique economic reality, but it seems many CFOs have taken note of past success stories. While the understandable gut instinct in tough times can be to reach for the scissors, previous recessions have shown this isn’t necessarily the best route.
A study by the Harvard Business Review of the Great Financial Crisis of 2008 found that the most successful companies “cut costs mainly by improving operational eficiency”, building cash reserves and investing further in their biggest profit drivers.
The one area where we saw notable cutting (although still only 30% of respondents) was general administrative spend, which, again, suggests a drive towards efficiency far more than it suggests any form of panic-induced fire fighting. Elsewhere, CFOs are either sticking with or ramping up spend on sales & marketing and research & development, which further indicates how finance functions are looking to chart a course through the storm, rather than waiting it out with the hatches battened.
There are signs, however, of the aforementioned volatility at play, and the level of planning and data required to navigate it. December last year, only half of the CFOs we spoke to had their budgets in place for 2023, hinting at a degree of understandable reluctance to commit before Q4 was rounded off. One investor we spoke to also told us that, for top CFOs, budgeting is no longer an annual exercise. Due to the volatile and uncertain nature of the modern economy, and the modelling and data afforded to finance teams by their arsenal of tools, many of their portfolio companies now review and rewrite budgets on a monthly basis. Budgeting now has to be dynamic.
03. Funding and Investment
Following a blockbuster 2021, which saw a record $1.2tn in private fundraising, private markets have returned to planet earth, impacting round sizes and valuations, the latter by as much as 30-50% for seed and series A..
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