A new survey from Grant Thornton revealed that despite a substantial drop in confidence, chief financial officers (CFOs) still anticipate growth.
Grant Thornton’s Q3 2024 CFO survey engaged more than 230 senior finance leaders and found that 79% of them expect growth in net profits over the next 12 months — a 10-quarter high for the survey. However, the percentage that expect growth over 20% fell amid economic and political volatility.
In another sign of uncertainty, only about half (51%) of CFOs are confident in their business’ ability to meet their goals for increased demand. This is a 12-point drop from the firm’s Q2 CFO survey and the lowest mark for this figure in a year.
Confidence in other business areas was also down, with 53% of CFOs saying they were confident in meeting supply chain objectives and a similar number (49%) expressing confidence in meeting labor needs. This was followed by 42% confidence in meeting cost control goals and 45% in growth projections. And when CFOs were asked about their areas of focus, cost optimization rose to 64% — a 10-quarter high.
Despite these numbers, Paul Melville, national managing principal of CFO Advisory for Grant Thornton Advisors LLC, said finance leaders are confident.
“Finance leaders’ belief in their ability to drive profits at their organizations remains unshaken, even as their confidence in other key fundamentals tumbled in an unsettled environment,” said Melville. “CFOs believe they can push the right buttons to help their organizations thrive in the long term.”
Spending on IT and Digital Transformation Surges
The survey revealed that nearly two-thirds (66%) of finance leaders expect to increase their spending on IT and digital transformation in the next year. That’s a 15-quarter high in the survey, and according to Melville, the figure shows companies are intent on keeping pace with the latest technology.
“CFOs understand that they need these technological capabilities to be competitive,” said Melville.
Most CFOs said they are using generative AI for customer relationship management/customer experience (60%, up from 45% in Q1) and product/service development (58%, up from 35% in Q1).
Meanwhile, the survey indicated that boards are getting more active in understanding governance over generative AI, providing a steadying influence in an area with potential for high rewards and high risks.
“In the era of GenAI investment, management teams will spend resources on the use cases they believe create a competitive advantage in the market,” said Mike Notarangelo, partner and Private Equity Audit & Assurance leader at Grant Thornton LLP. “Boards of directors need to develop an agile AI governance framework to evaluate those investments and safeguard against AI-related business risks.”
Investing in Sales and Marketing is on the Rise
Senior finance leaders also indicated that they’re investing in sales and marketing more than they have in the previous 15 quarters that Grant Thornton has fielded this survey. Fifty-six percent expect their sales and marketing expenses to increase in the next year, while just 7% expect them to decrease.
“This is how you gain market share,” Melville said. “CFOs are recognizing the need to have differentiation in their products and services, and they’re investing more in sales and marketing for those products as a proactive move to drive more growth and capture market spend.”
For the fourth straight quarter, the top area identified for potential cost cuts was human capital expenses related to employee headcount and compensation levels, which was identified by 42% of respondents. However, workforce rationalization was at an all-time low in CFOs’ areas of focus (27%), which represents a 20-point drop from the previous quarter.
Nevertheless, only 14% of respondents said they don’t plan to cut any costs — a record-high in this survey.
Keeping an Eye on Politics
Sixty-one percent of respondents said it is possible that the U.S. election results in November will lead to a change in their business strategy. Respondents said the election’s biggest impact on the business environment will be its effects on the overall economy, with the election’s effects on tax policy, regulatory policy and trade policy having lesser impacts on business.
As a result, CFOs have mixed views on how to invest while the election is still undecided. Thirty-one percent are accelerating some investments in anticipation of the election, while 23% are holding off on some investments until after the election. Meanwhile, 46% said the election will not affect their investment plans.
Melville cautioned against getting too caught up in election concerns during business planning.
“You’re still going to invest in AI to drive improvements through technology,” Melville said. “You’re still going to make sure your cybersecurity protections are strong. The business fundamentals like efficiency in the finance function and the basics for growing your business aren’t going to change regardless of who is in the White House or the government.”
To see additional findings from Grant Thornton’s Q3 2024 CFO survey, click here.