Lessons for the CFO: Managing finances and the workforce this winter

By Hartmut Wagner, CEO of Serrala

Hartmut Wagner, CEO of Serrala

This month, 11 water providers have been forced to cut £150 million from customers’ bills due to missing targets on pollution.* This follows a series of water leaks amidst the driest summer in England since 1935, so it’s hardly surprising that the senior leadership at water companies have faced criticism and subsequent financial issues.

The question is – could these issues have been avoided? The answer is yes, and the lesson here for CFOs across all sectors is rooted in risk management. Arguably a lack of foresight from executive teams caused the series of crises at these water firms and should be considered a wake-up call to senior leaders across a multitude of sectors.

As we enter a challenging economic winter, CFOs are facing a number of risks, which are going to be impossible to predict and mitigate without the correct insight and appropriate technology. Over the next six months ‘leaks’ within infrastructure or financial losses will not be limited to water companies battling lasting effects of drought. Instead, for multiple sectors and businesses, meticulous risk management will be essential if CFOs are going to survive a market even more complex and demanding than the 2008 financial crisis.

A recent Deloitte survey of CFOs found that 63% believe recession will hit within the next year and have already experienced sharp rises in financing costs. Simultaneously, the International Monetary Fund (IMF) has forecasted, in their latest analysis, that global growth is set to slow from 3.2% in 2022 to 2.7% in 2023 as a result of tightening financial conditions in most regions.

Ultimately, the outlook is challenging enough without the prospect of avoidable risks that can be prevented with the right planning and processes.

Automate finance or fall behind

A recent Gartner report has highlighted that less than one-third of CFOs are confident that the technology accessible in their business is capable of ensuring future business success. Yet to survive the looming recession and thrive on the other side, technology – particularly throughout the full cycle of the finance function – will be essential.

Interestingly, the post-pandemic ‘Great Resignation’ has further spiked the urgency for CFOs to increase automation throughout business processes. The shortage of employees, which started in restaurants and airlines, has now spread throughout the financial sector and has created a skill gap that senior leaders are struggling to fill. Even top firms including the likes of Deutsche Bank and Goldman Sachs are suffering in ‘talent wars’ as they fight to attract and retain the right candidates.**

However, this is just one of the plethora of problems facing CFOs and their workforces. These issues are being further exacerbated by ‘quiet quitting’, another term for employee disengagement that has recently gone viral across social media channels. The current craze, which is gaining traction across Europe, encourages workers to avoid going above and beyond their job description and is having a big impact on productivity levels.

Automating the finance function, for one, alleviates the pressure on stretched teams by adding a virtual team member that can take over repetitive and time-consuming transactional processes. This can break the negative cycle of further resignations as remaining employees will have more time to focus on strategic decisions, offering them the chance to become true value creators. Removing these arduous manual tasks will also attract employees and give businesses the upper hand in the ongoing ‘talent war’.

Take processing invoices as an example. It’s a simple but time-consuming task which can often be derailed by human error. Intelligent software can create efficiencies by reducing the time taken to completion and eradicate costly mistakes. It can also help to combat issues associated with ‘quiet quitting’ as disengaged employees will have time to focus on the tasks that they find more stimulating.

Achieving 360 cash visibility

As we enter a period of economic uncertainty, cash undoubtedly becomes king and having a 360˚ view of your finances becomes crucial. Staying on top of a business’s cash position is difficult if balances are still being drawn manually from bank statements and quarterly or annual figures. It’s labour intensive, time consuming and increases the risk of being blindsided by problems that could have been avoided with the correct level of insight.

Instead, technology that uses artificial intelligence (AI) can provide a clear picture of current and future cash balances and flows, meaning CFOs can anticipate potential cash flow concerns before they become a reality. Furthermore, the technology can provide actionable insights into the spending and cash flow trends of a business, and AI can forecast potential issues and scenarios facing a business in a way that the human mind alone cannot. This ultimately offers CFOs enhanced decision making powers and therefore better risk management capabilities. For a job role rooted in data, implementing technology like this should feel like a natural progression.

The new CFO

Unlike past decades, the new role of the CFO must be inextricably tied to technology. Interestingly, a Gartner Survey conducted this summer highlighted that 45% of CEOs and CFOs would cut digital investments last in the face of continued economic disruption. Talent and technology were prioritised over investments in mergers and acquisitions, for example, which speaks volumes to the recognition that CFOs are placing on the success of technology for improving efficiencies and protecting margins.

Without a doubt, digitisation and automation will be key to survive the economic downturn and to avoid any unnecessary gaps in infrastructure.

The big threats for CFOs to look out for right now are an unproductive workforce or a shortage of skilled labour and cash. However, as the recession unfolds and the winter begins, CFOs may be faced with a multitude of other potential risks that are impossible to properly understand or mitigate against without the right tools. No matter the industry or the risk, understanding that technology will be the solution will be what sets one CFO apart from the next.