For the U.S. business community at large, 2017 might have seemed like a generally positive year. The economy is strong and resilient despite some of the same external risks that have always been present, and most consumers and businesses are taking the opportunity to spend and invest more. It's an atmosphere that inspires good feelings as we head toward the end of the year, but it's also one that can lead to complacency. Perhaps that's why many CFOs noted in a new survey that they were ready to shift their companies into overdrive and go on the offensive into 2018, prioritizing higher revenues, more cash investment and new product or service offerings.
"More CFOs find themselves at a crossroads as 2017 comes to a close."
These insights come courtesy of Deloitte's third quarter CFO Signals study, which polls a panel of 160 finance chiefs from around North America each quarter. The survey's questions and findings typically relate to broad strategy and viewpoints on the overall fiscal health of their organization and the economy in general.
According to an executive summary of Deloitte's findings for the most recent quarter, CFOs might have found themselves and their companies at a crossroads despite favorable economic tailwinds. In recent quarters, CFOs responding to the survey have made their confidence in the economy's health clear, but this was the first time in at least a year that their expectations for a continued growth trajectory fell. Specifically, predictions for earnings growth and capital investment growth each fell compared to the previous quarter, although the study's authors pointed out these figures were still at or near two-year highs.
"Approximately 60% of CFOs say they are biased toward revenue growth, which is among the highest levels in survey history," said Greg Dickinson, managing director at Deloitte. "Only 20% claim a bias toward cost reduction, one of the lowest levels in the seven years we have conducted the survey, for a net value of +40%. The bias toward investing cash over returning it to shareholders, 56% versus 14%, also remains near survey-high levels."
CFO confidence stalls
One of the most interesting findings pulled out of the data was in relation to the last seven years of CFO confidence readings compared to economic performance over that same time. Deloitte researchers found that CFO confidence as measured by a number of broad metrics posted its largest decline since the first quarter of 2015. Compared to the price of the S&P 500 index, which serves as a basic metric of broad economic performance, CFO confidence fell almost in lockstep with a slight dip in share prices. However, the S&P 500 and the global markets overall have since rebounded to record highs. Meanwhile, CFO confidence in their organization's ability to boost revenues or investment hasn't improved all that much. And looking over the last seven years, CFO expectations have been on a downward trend despite a stock market that continues to grow at an impressive clip.
The takeaway from these findings is that more CFOs will look to prioritize an offensive approach as they move into 2018. The best path forward for those who want to succeed in this strategy requires a robust internal finance and accounting function. Consero is one firm at the forefront of giving CFOs the tools they need to gain critical insights and develop an action plan based on facts rather than conjecture. In a world that's growing increasingly unpredictable, Consero is helping CFOs chart a new course for growth.