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The Accenture 2013 CFO research found that chief financial officers (CFOs) and other senior finance executives around the world are cautiously optimistic about business prospects. However, our research also revealed that CFOs seemingly find their ability to make confident investment decisions hindered by their inability to accurately forecast their business performance in a continuously uncertain business environment.
Sixty-one percent of the senior finance executives surveyed expect to realize an annual revenue growth of 5 percent or more by 2015, and one-quarter of respondents project growth of at least 10 percent. Most of the CFOs and senior finance executives surveyed agreed that well-informed decision making will be essential for them to respond positively to the turbulent market environment.
The new Accenture study is based on responses from 1,250 senior finance executives, of which 24 percent are CFOs—from nine countries and 12 industry sectors.
The study illustrates that one of the keys to success for many CFOs may be their ability to balance competing priorities for investment, cost reduction and debt repayment, as well as the continuing pressure to return cash to shareholders.
Organizations with good visibility, supported by strong analytics capabilities, may be better positioned to support profitable business growth. However, many of these organizations lack the visibility required to support performance management.
Going forward, the ability to deliver timely, actionable data to improve decision making in an uncertain environment will be critical for CFOs and senior finance executives to attain business growth. Here are the key findings of the Accenture 2013 CFO research:
Longer-term growth expectations: Sixty-one percent of senior finance executives surveyed project annual revenue growth of 5 percent or more by 2015, and one-quarter project growth of at least 10 percent.
Growth prospects for 2013: Forty-five percent of the respondents are more optimistic than last year about their company’s growth prospects, 27 percent are less optimistic and 28 percent expect growth to remain stable.
Visibility into business performance: Twenty-eight percent of the respondents had little or no information to predict the performance of their business in 2013, while 54 percent said they had only about half the information needed to get visibility into performance.
Factors affecting ability to forecast: Economic uncertainty remains one of the CFO’s greatest barriers to forecasting business performance, but finance executives also point to commodity prices, volatility and shifting consumer expectations as leading factors affecting their ability to forecast.
Investing in the finance function: Sixty-four percent of the respondents said they would invest in upgrading the skills of their finance professionals and/or systems to support planning, budgeting and forecasting.
Use of cash: When asked what they would do with cash reserves within the next year, fewer than one in four finance executives (23 percent) said they would retain cash. Rather, the majority of companies (79 percent) plan to use their cash mainly to reinvest in the business and/or fund acquisitions.
Risks of holding cash: Fifty-two percent of the respondents said holding cash limits innovation and new product development, and 49 percent said it restrains growth opportunities.
Primary drivers of growth: Companies do not expect growth to come from one line of business, from one region or from a single acquisition. Rather, they seem to view growth coming from a combination of organic and inorganic initiatives, with 41 percent of respondents identifying both organic and inorganic developments as the primary drivers of growth for their companies this year.
Organic and inorganic growth positioning, and barriers: Fully 95 percent of the respondents said they believe their company is at least somewhat well-positioned to pursue an effective organic growth strategy, and 94 percent said their company can pursue an effective inorganic growth strategy. Forty-nine percent of the respondents cited pricing and cost competitiveness as the biggest barriers to organic growth and 55 percent said availability of financing for deals is the primary obstacle to inorganic growth.
Although the CFOs and other senior finance executives who participated in the study are seemingly more optimistic about the future, their optimism is tempered by ongoing economic uncertainty. Accenture believes the following three characteristics tend to distinguish organizations well-positioned to prosper:
Execution against a clearly defined strategy for the use of cash—a strategy that can balance the need to invest in growth opportunities, return funds to shareholders, pay down debt and maintain adequate reserves as one means of protection toward future economic uncertainty.
Investment in tools and technologies that can help them to more accurately forecast performance, identify risks and opportunities, and then adjust their investment decision making accordingly, positioning them to potentially take advantage as the global economy slowly improves.
Adoption of a very disciplined performance management process for tracking growth investments, which includes, among other elements, clear definition of the “criteria for abandonment” of investments under different economic scenarios to facilitate disciplined management of their growth investment portfolio.
Donniel Schulman: Managing director – Accenture Management Consulting, Finance and Enterprise Performance, leads the practice globally. With more than 20 years of industry and consulting experience, he has a passion for working with CFOs and senior finance executives to help them achieve high performance by increasing the shareholder value they deliver.
David Axson: Managing director – Accenture Management Consulting, Finance and Enterprise Performance. He has more than 28 years of experience in finance, industry and entrepreneurial pursuits working with clients in more than 40 countries, and leads the thought leadership efforts for Finance and Enterprise Performance worldwide.
July 18, 2013
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