Grant Thornton survey: Despite cost and hiring challenges, CFOs reach highest level of optimism in nearly three years

— 58% of CFOs show optimism in the U.S. economy
— 63% are confident in their organization’s ability to meet increased demand
— 75% expect net profit to grow over the next 12 months
— 94% are using or are exploring potential uses for AI
— 64% note IT/digital transformation as a top area for expense increases

A new survey from Grant Thornton, one of America’s largest brands for audit, assurance, tax, and advisory services, revealed that chief financial officers (CFOs) are optimistic about the U.S. economy. In fact, at 58%, this is the highest level of optimism since the third quarter of 2021.

Grant Thornton’s Q2 2024 CFO survey of more than 225 senior financial leaders revealed several other positive indicators.

The data showed that 63% of respondents are confident in their organization’s ability to meet increased demand — a record high in the history of the CFO survey. Respondents are also feeling confident about meeting supply chain needs (62%), growth projections (56%), cost control goals (55%) and labor needs (55%).

Additionally, 75% of CFOs expect their net profit to grow over the next 12 months, while 69% expect their revenue to increase — a positive sign, since over two-thirds (67%) expect their expenses to increase.

Still, CFOs believe the cost of capital remains high, as 57% of respondents said cost optimization remains their top area of focus this quarter.

“Although most finance leaders are confident in their ability to control costs, it’s going to require significant focus,” said Paul Melville, national managing principal of CFO Advisory for Grant Thornton Advisors LLC. “The business environment is ripe for growth, but CFOs must manage costs to capitalize on it.”

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Continuing to prioritize AI and technology

In Q2, the portion of respondents who either are using generative artificial intelligence (AI) or are exploring potential uses rose to an all-time high of 94%. Additionally, deployment of generative AI to assist with numerous tasks — especially cybersecurity and risk management — grew substantially compared to Q1.

As CFOs work to take advantage of these emerging capabilities and mitigate their associated risks, it’s no surprise that they rate technology upgrades (39%) as their biggest challenge, followed by cybersecurity (37%).

Aligned with these challenges, the Q2 survey’s top two areas for expense increases for the next 12 months are IT/digital transformation (64%) and cyber risk/security (62%). In the history of the survey, these two percentages have never been higher.

“Cybersecurity is an area that every company has to continually address,” said Mike Notarangelo, partner and Private Equity Audit & Assurance leader at Grant Thornton LLP and a principal at Grant Thornton Advisors LLC. “There’s a sharpened focus on it in the public markets given the recent SEC cybersecurity rules and some notable breaches in the past few years.”

Managing cost cuts

Inflation and the need for digitalization are among the most significant burdens that CFOs are facing as they attempt to keep costs under control.

According to the Q2 survey results, over one-third of finance leaders (37%) identified materials costs as an area for potential cuts — perhaps showing optimism that inflation may finally subside in the coming months.

“The surface looks calm,” Melville said, “but underneath, finance leaders are paddling like crazy to control all their costs, mitigating against liquidity challenges and materials costs while making parallel investments in AI and cybersecurity, all of which will pay off.”

Finance leaders also cited human capital expenses related to employee headcount and compensation levels as the top area for potential cost cuts. Meanwhile, 47% of CFOs identified workforce rationalization as a top-three area of focus for the next six month – an increase of 14 percentage points over the previous quarter.

“Across the board, general and administrative costs are under a microscope,” Notarangelo said. “Accounting and finance teams are focused on maintaining appropriate levels of talent while using technology to optimize processes. We’re focused on delivering insights to our clients using the data we gather during the audit that identify opportunities for operational improvements, cost reduction and value creation.”

Hiring challenges amongst budget constraints

After the post-pandemic talent shortages of the past few years, CFOs understand the importance of maintaining staffing levels that will enable them to deliver on their strategic goals. Fifty-eight percent of finance leaders said attracting and retaining key talent is a human capital priority for the next 12 months.

However, finance leaders also said their top challenge for bringing in talent is budget limitations. When the talent pool is limited, it often takes a bigger financial commitment to recruit the right people.

“When it comes to human capital costs, CFOs seem to be saying, ‘I haven’t got the budget to spend that much as costs rise elsewhere’,” Melville said.

On the other hand, CFOs seem overwhelmingly satisfied with the performance of their human resource functions. Ninety-one percent of finance leaders said their organization has a solid talent strategy in place to deliver on business goals, and 89% said their technology platforms allow employees to maximize their output and efficiency.

“People are trying to do more with less,” said Jim Wittmer, the managing principal of Grant Thornton’s Atlantic Coast region. “There’s a willingness to spend on technology because it can lead to greater efficiency down the line, but there’s definitely a cost rationalization element in the market right now.”

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