Today’s CFOs are walking a tightrope. Economic uncertainty, supply chain disruption and market volatility have them balancing cost-cutting and profit-building – and leaning too far either way could spell disaster. Deciding the best course of action in such unpredictable times is challenging enough, and the ever-increasing scrutiny of business spending only makes it harder.

Finance leaders have to reduce costs wherever possible – without stymying opportunities for growth – so the challenge is to improve margins while taking a proactive and prudent approach to risk management. That’s especially in an age when accurate forecasting is arguably more difficult than ever.

In its inaugural Strategic CFO Survey of 600 CFOs and finance leaders across North America and Europe, Coupa has investigated how companies are staying competitive in these volatile times, and how they might benefit from a comprehensive Business Spend Management (BSM) platform.

Hard times mean hard choices

The survey revealed some surprising and, in some cases, startling feedback. The overwhelming majority of respondents reported increasing struggles to maintain a competitive edge, exacerbated by tradeoffs between cutting costs and investing in growth, and a huge proportion expressed concern about hitting sales forecasts over the next 6-12 months. Clearly, it is a stressful time to be a CFO.

Layoffs would be a quick way to cut costs, but most CFOs are resistant to such measures, despite the pressure on them to find creative ways to drive efficiency, while also striving to hit sales forecasts and improve cost transparency. Staring down the barrel of a possible recession – as well as soaring borrowing costs as interest rates rise – it is becoming increasingly difficult to build organizations that are not only more agile and efficient, but also more resilient.

In the survey, a staggering proportion of CFOs expressed concerns about financial performance in the event of a recession. Specifically, they fear declining profitability and margins, meeting payroll obligations, and falling behind competition.

“Economic volatility calls for a strategy of managing costs intelligently, rather than hurrying to cut costs reactively,” says Coupa’s CFO. “The ability to do this hinges on having a wealth of data that is accurate and timely to inform decision-making. Resilient companies use intelligent spend data to execute in the present with urgency, but in a way that

reduces the risk of unintended long-term negative consequences.”

Shackles on strategic decisions

CFOs do understand that they have options when it comes to increasing profitability. They are leaning towards a focus on increasing efficiency, investing in digitization, and retaining employees. Similarly, they understand that increasing the pricing of products or services, enforcing stricter spending rules and limits, and reducing business travel could be effective strategies to drive growth in the event of a recession, though other options are on the table.

That said, many CFOs feel that a key problem is a lack of full visibility into spend data across their company, which makes it much harder for them to address the big challenges of supply and demand uncertainty, concerns about increasing margins and profitability, and the need to grow revenue, not to mention managing the effects of rising wages and cutting cost

Internal visibility is, therefore, a key area for improvement, but there are also external factors to consider – not least the rising cost of goods and services, local or regional political instability, and rising interest rates. At the same time, finance leaders have to juggle their responsibilities when it comes to employee attrition, and the impact of delayed IPOs or M&A activity.

Among these pressures, CFOs are trying to chart a course towards long-term stability without sacrificing opportunities for growth, but a huge proportion report growing pressure from other company leaders to make sacrifices for short-term relief. In many cases, the result of this pressure is tension between the finance team and the rest of the business, whether it is the CEO, CIO, the HR team, or the board.

Layoffs certainly provide the short-term fix that other departments might be looking for, but it is a widely held belief among CFOs that this only solves the immediate problem at the cost of long-term challenges, so they are set on finding alternate cost-cutting measures until market conditions improve. Increasing prices, enforcing stricter spending rules, and renegotiating supplier contracts are just a few of the alternatives on the table.

Building the case for BSM

What these pressures point towards is the need for a technological solution – with Business Spend Management (BSM) now firmly on the radars of many CFOs. BSM goes beyond core transactions to create a holistic view of the drivers and consequences of company expenditure. In short, it gives CFOs the visibility they currently lack.

“Automation technologies allow CFOs to chart a course through the storm and emerge stronger,” says Coupa’s head of finance. “It’s absolutely critical that CFOs optimize for financial health by equipping their organization to respond faster and more strategically to disruption. It’s how CFOs will help their companies survive a recession and come out of it ready to accelerate growth.”

While more than half of finance leaders say increasing efficiency is key to boosting profitability, many are hampered by their reliance on outdated legacy systems, which leave blindspots and lead to misguided assumptions about how to best manage spend. Less than half of respondents report having proactive or predictive financial forecasting and risk management at their disposal.

While most finance leaders can access spend data instantly, but a significant number must rely on multiple systems to do so, often having to wait multiple days for results. Worryingly, almost one-third report that their processes are still manual or hands-on.

The logical conclusion is that many CFOs and their teams would benefit greatly from digitalisation of the entire back office. Efficiency will remain out of reach without modern, cloud-based systems to provide visibility. A key tenet of Coupa’s approach to BSM is that CFOs can’t cut what they can’t see.

Furthermore, CFOs know that they need new tools. Many say they lack full visibility into spend data across the company, noting that spend data is siloed across multiple sources, and many must rely on labor-intensive processes to gather data.

A comprehensive BSM platform could be crucial to combatting today’s economic challenges, as they equip an organization to reduce uncertainty, weather any recession without resorting to broad cutbacks, and respond to macroeconomic challenges quickly and effectively by shedding light on how to meaningfully improve margins and profitability.

BSM could be the game-changing technology that enables CFOs to confidently execute a prudent strategy of containing costs – and build the resilience that today’s unpredictable markets demand.

To read the full findings of Coupa’s ‘Strategic CFO’ study, please click here