6 CFO Trends and Outlook for 2022

Matthew Dziak

CFO Trends and the Future of Finance

We all managed to get through 2020 and rebound in 2021, but where do we go from here? 2022 brings about just as much opportunity and excitement as uncertainty. But that’s no reason to fear. After all, it’s the job of Finance to not only plan for the future but help but shape it.

As philosopher John Dewey famously stated, “the best preparation for the future is a well-spent today.” CFOs and finance executives who take the time to evaluate results, with an eye to the future, will set their Company up for greater success in 2022 and the ensuing years. 

1. Planning for macroeconomic uncertainties 

Supply chain issues and shortages

Many of the leading supply chain experts claim demand will continue to eclipse supply and issues will persist through at least the first half of 2022. Although we’ve seen the shortage spike cool off, we aren’t completely out of the woods yet. Given the uncertainty around a ‘third wave’ of Coronavirus variant, different countries dealing with mitigating spread differently and the difficulties forcing companies to turn away additional work and customers due to supply constraints, what might be the lasting impact?

For one, just-in-time inventory methods are clearly no longer favorable. Instead of keeping just enough inventory on hand to fulfill orders, manufacturers and any company reliant on physical goods, must consider lead times and hold additional inventory to avoid stockouts. This can have a short-term draw down on the balance sheet, but it should be temporary, as the inventory is necessary to satisfy production for the increased demand. 

Inflation, is it here to stay?

In December 2021, core inflation reached 7 percent, and the rise in costs is felt across the global economy. From vendors sourcing supplies to consumer purchasing and employers compensation packages, the influx of money supply injected by The Fed, along with the ramifications of the pandemic, has led to a substantial rise in inflation. Some food and beverage suppliers, like Coca-Cola and Mondelez, have passed costs onto customers, raising prices by 7 percent to start 2022

We have not experienced this level of inflation since 1980, where we saw inflation rates peak over 13 percent. Although borrowing costs are at historic lows and helped fuel many growth initiatives for companies seeking expansion, inflationary pressures are mounting. To combat this, the Fed has committed to raising interest rates in 2022, which could soften some of the inflation pressures but would increase the cost of borrowing capital. It's imperative that you plan for ongoing inflationary scenarios so that you are prepared for any circumstance.

75 percent of CFOs expect an increase in the 2022 US federal funds rate to range between 0.26% and 1.0%, according to Deloitte’s CFO Signals Survey.

Capital expenditures should continue to rise for many, while some may look to lock in refinancing terms now and others might have to curtail borrowing amounts. Keeping a close eye on details comprising your P&L, cash flow trends, and analyzing details in your forecasts will go a long way to determine optimal approaches for your organization. 

Forecasting and preparing for the future

Regardless of your company’s situation, forecasting and scenario planning is essential to prepare for major economic developments and uncertainties. Although we can’t control the future, we can plan for it. These macroeconomic uncertainties will persist and emphasize the need for an efficient process to plan and forecast multiple scenarios at any given time. 

Monthly forecasting allows for Finance to weigh the actual metrics from the previous months and develop forecasts and scenarios based on changes such as cost of goods sold, capital or taxes. These forecasts should be proactive, not reactive to any single event, and easily tweaked depending on possible outcomes. Deep analysis of forecasts deriving the causes of variance leads to strategic insight necessary to drive effective decision making. 

The ideal forecasting approach will keep your company on track to hit your targets

2. Getting control of your data is non-negotiable

To build a mature finance function, it is fundamental that you get control of your data. What do we mean by that exactly? It means having direct access to potentially siloed data from your sources of truth, such as your general ledger or ERP, CRM software, HR system and other operational data, and consolidating it for consumption.

With companies reliant on various systems and sources of truth, centralizing financial and operational data efficiently is a tremendous challenge for many modern Finance Functions. 

Only 18 percent of financial and nonfinancial data sourcing efforts are mostly or entirely automated, according to the Progress and Challenges on the Path to xP&A, a report and survey by the Association of Finance Professionals.

Cobbling together endless spreadsheets and referencing them to a master sheet is incredibly time consuming, prone to manual error and isn’t scalable. To be efficient and impactful, a Finance Function needs to rely on software to control its data. 

Robust FP&A Software offers the ability for Finance to centralize company data into a single system for consumption. With direct and automated integrations to each of the data warehouses, finance teams can spend less time on manual processing and more time on meaningful analysis.

In 2020, the pandemic emphasized the need to not only digitize most (if not all) processes, but also consider new solutions and tools sooner. Those companies who adopted modern software and implemented processes prior to 2020 found themselves in the best position to either capitalize on new opportunities or decide what actions are necessary to sustain.

As uncertainty around the macroeconomic environment remains, and the need to find new levers to pull for growth persist, having centralized operational and financial data at your fingertips is a necessity, not a luxury. 

3. Turnover is real, but there are solutions

There is no denying the existence of the Great Resignation. Emerging from the pandemic, many companies realized the ability to operate as a remote or hybrid remote and office workspace company was not a detriment to productiving. Along with inflation’s impact on compensation, recruiting and retaining top-talent has never seemed more elusive. 

Here are some startling statistics for you. There were over 20 percent more resignations in 2021 compared to 2020 and from August-November 2021, 12.9 million U.S. workers quit their job. It’s a case of basic supply and demand that most CFOs and finance leaders should fully comprehend. At the moment, there are far more companies in need of quality talent than qualified candidates able to fulfill such roles.  

FP&A roles specifically are in great demand. According to LinkedIn's 2022 Jobs on the Rise, Head of Financial Planning and Analysis (FP&A) ranks 13th, ahead of software developers and ICU nurses, among other high-demand roles.

What can be done to overcome resignation and ensure retention? 

Consider rewarding your team for reaching milestones, hitting targets and KPIs should be second nature. You should also pay attention to compensation market averages and ensure your team is at or above those marks or risk losing them. On average, companies plan to increase salary budgets for employees in 2022 by 3.9 percent. 

Create a company culture that exudes inclusion, growth and rewards success. Employees wish to be appreciated for their efforts and receive the necessary compensation to match. If full time employee expansion is not within budget plans, companies should consider third-party and other outsourced providers. External expertise on a part-time or consulting basis can help close the skill gap and even improve processes significantly, without breaking the budget. 

If you are finding it difficult to hire quality talent within your Finance Function, expanding your search outside of traditional accounting and finance could be a solution for you. Hiring within an Finance Function doesn’t necessarily need to be sourced from accounting and finance programs and backgrounds.

Take Meta (Formerly Facebook) CFO David Wehner for example. Wehner has a background in chemistry and applied physics before crossing over into a career in Finance. Or Visa CFO Vasant Prabhu, who began his career as an engineer before transitioning to finance, leading to a 25-year career as a CFO. 

Finance, especially FP&A, requires more of a mindset dedicated to identifying and solving the business problems through insights and strategies. The technical know-how can be learned, but the inquisitive nature of a candidate is where true value lies. Consider part-time employees, especially parents who aren’t interested in full-time work, but wish to contribute to the workforce. They could be valuable assets to absorb certain accounting and other controller managed tasks. The rise in popularity of remote work provides access to these people, as long as your company uses the proper communication and task management tools.

Although there are other sources of talent beyond traditional full-time, local employees, the best talent, the ones who can have the greatest impact on your company's outlook, will come at a cost. As long as that cost is realized in the annual budget, your bottom line should increase in tandem with any expanded compensation packages.  

4. Processes are still key to sustained success

Any Finance Transformation includes a balance between people, processes and technology to truly see an impactful difference in your Finance Function. While people are valuable and technology provides added capabilities and capacity, it is processes that will stand the test of time as a company grows and navigates the future. 

Adopting repeatable processes ensures success despite potential turnover within a Finance Function that could otherwise hinder its value. Establishing proven processes will prevent attrition and turnover from having a dramatic impact on your Finance Function. 

For example, your entire budgeting, forecasting and analysis shouldn’t be siloed in the mind and spreadsheets of a single person or small group within your Finance Function. Instead, you should have visibility into your data and finance deliverables should be managed in a tool that offers you control. You could also develop a playbook and require your team to document certain steps within their processes, to ensure critical details aren’t overlooked. 

CFO inspired trends and outlook for success

5. Accounting and FP&A Functions must always be synchronized

No matter if your Company works fully remote, entirely from the company office or a hybrid of the two, the team members within your Finance Function need a framework to collaborate and solutions to meet deliverables and provide strategic insight.

Arduous book closing processes, preparing management reports, conducting monthly forecasts and variance analysis must be done efficiently, accurately and effectively. With so many disparate data sources, you need to be sure the accounting or controller function has standardized processes in place to ensure reconciliation as well as accurate and timely reporting. 

The controller function operates much like electricity. It supplies the FP&A and forecasting processes the same way electricity powers your lights, computer and appliances. But the moment that electricity goes out, it prevents you from fulfilling the needs and deliverables of your function. 

6. The robots are actually here to help

There is absolutely no dispute regarding the adoption of automation, machine learning and the ability to dramatically improve efficiency. If you’re envisioning a scene from the movie ‘I, Robot’ starring Will Smith or ‘Blade Runner’ with Harrison Ford, don’t let your imagination take over just yet. The robots powering software automations are process-oriented, not actual physical bots. Embrace change, don’t fear it. 

When it comes to robotic process automations (RPA) Finance leaders see the value. According to the Gartner’s Finance Trends Survey, 68 percent of CFOs expect to spend more time on RPA and other workflow automations.

The purpose of RPA is more than just convenience and time savings. It’s added accuracy, peace of mind and capacity for the humans (you) to conduct high-impact analysis and offer actionable insight to management and decision makers. That is where the true value of a Finance Function lies. Inevitably, there will come a time when we will all look back in disbelief that we used to have to sort and structure all of this data manually.

Stay Ahead of the Finance Trends

Finance executives faced a whirlwind of events and circumstances over the past few years. The ramifications have come in waves and the full impact has yet to be felt. Although we don’t have a crystal ball to predict the future, we can stay abreast of the latest trends and solutions. 

While it is true that trends come and go, in an ever-evolving world, those that take action to transform their Finance Functions now, will stay ahead of the competition for the foreseeable future. 

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