— 54% of CFOs report being optimistic about the U.S. economy
— 61% of respondents predict they will experience net profit growth
— Four out of five plan to increase investment in digital transformation
CHICAGO — A new survey from Grant Thornton LLP, one of America’s largest audit, tax and advisory firms, reveals chief financial officers (CFOs) are surprisingly optimistic in the face of economic uncertainty.
Key findings from Grant Thornton’s 2022 Q4 CFO Survey found 54% of CFOs reported being optimistic about the economy, marking the highest percentage in the quarterly survey since the fourth quarter of 2021. At that time, 57% were optimistic — before the onset of runaway inflation, rising interest rates and economic turmoil.
Further, 61% of survey respondents predict that they will experience net profit growth over the next 12 months, year over year, and 40% expect growth of 6% or higher.
“In the previous quarter, we used the words ‘cautiously optimistic’,” said Sean Denham, Grant Thornton’s National Audit Growth Leader. “Over the past quarter, the stock market has held its own, inflation has decreased and unemployment rates continue to decline, so there have been reasons for optimism. Everyone has been waiting to see what the Fed does on interest rates, but the focus is on the annual and quarterly earnings reports.”
Investing to get an edge and increasing emphasis on cybersecurity
Even after precipitous interest rate increases, survey respondents show few signs of cutting investment in future growth or technological efficiencies that could give them an edge.
Four out of five CFOs said they plan to increase investment in digital transformation, confident that technological advancements present opportunities to operate more effectively with greater efficiency.
Meanwhile, a substantial majority of finance leaders plan to increase investment in their demand-generating capabilities (82%) and customer-retention capabilities (81%) over the next 12 months related to marketing and sales. Thirty percent of CFOs now rate customer retention as a top challenge.
David Koppy, a principal in the Strategy practice at Grant Thornton, said this focus on customer acquisition and retention reflects the sustained expectations for growth at companies throughout the marketplace.
With rapid business growth and an increased investment in digital transformation, CFOs are spending more to make sure their new assets are protected. For the second quarter in a row, cybersecurity risks ranked among the top three challenges faced by finance leaders.
“As you put more of your product and service interface in a digital medium, you absolutely increase the chance that you’re going to have a cyberattack,” said Chris Unruh, national managing principal of Technology Transformation at Grant Thornton. “They go hand in hand.”
Cost optimization is top of mind
Cost optimization remains a top priority in the immediate term, with 55% of respondents rating it in their top-three areas of focus. However, finance leaders’ confidence in meeting cost control goals soared to 59% from 41% the previous quarter, demonstrating that many of them have had success in this area.
Denham said that, in response to the economic turbulence of the past 12 months, he sees evidence that CFOs have addressed costs in a methodical way, starting with the most important items on the P&L statement and working their way down. He said labor costs were addressed first, as the survey shows a drop of eight percentage points between Q3 and Q4 in those planning to cut headcount and salaries.
Addressing the supply chain was next, as supply chain remains the top challenge identified in the Q4 survey but experienced a drop compared with the previous quarter. Because companies need investment in digital transformation and cybersecurity to compete and protect themselves, those items often can’t be cut.
Shortly after the survey fielded, there were signs that inflation may be easing.
The U.S. Department of Labor reported that the consumer price index fell 0.1% in December. While that didn’t seem like a big drop, it was the largest month-over-month decrease since April 2020.
At the same time, CFOs said they were growing more confident in their ability to meet their supply chain and workforce needs. With their costs also under better control, that meant a possibility of brighter days on the horizon in 2023.
About Grant Thornton LLP
Grant Thornton LLP (Grant Thornton) is one of America’s largest audit, tax and advisory firms — and the U.S. member firm of the Grant Thornton International Ltd global network. We go beyond the expected to make business more personal and build trust into every result. With revenues of $2.3 billion for the fiscal year that ended July 31, 2022, and almost 50 offices nationwide, Grant Thornton is a community of more than 9,000 problem solvers who value relationships and are ready to help organizations of all sizes and industries create more confident futures. Because, for us, how we serve matters as much as what we do.
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