According to a recent survey by BDO, 2024 has not played out as anticipated in the world of middle-market finance. Despite initial hopes for stability, two-thirds of the 600 middle-market CFOs surveyed expressed concerns about economic volatility, comparing it to or deeming it even riskier than the challenges faced in 2023.
The challenges of the previous year were evident, with 83% of CFOs initially expecting revenue increases, but only 61% achieving that goal. The persisting uncertainties surrounding interest rates, inflation, geopolitics, and the impending presidential election have led these CFOs to predict modest growth in both revenue and profit for the current year.
Wayne Berson, CEO of BDO USA and chair of the global board of directors of BDO International, highlighted the unexpected difficulties faced by CFOs in 2023. Despite the apparent success in the stock market, Berson cautioned against complacency, emphasizing that the fundamental principles of effective business management remain unchanged. He stressed the need for CFOs to navigate the pressures of the current environment.
The BDO survey identified the tight labor market as one noteworthy issue, and 36% of respondents predicted that over the coming year, CFOs would play a bigger role in strategic workforce discussions. The primary workforce changes anticipated include raising monetary compensation, investing in upskilling or re-skilling, adopting remote or hybrid work technologies, and enhancing nonmonetary employee benefits.
However, the challenge of retaining talent is juxtaposed with the pressure on CFOs to optimize workforce costs. About one-third of middle-market CFOs plan layoffs in 2024, seeking the right mix of talent to align with business objectives. Additionally, 36% of CFOs intend to outsource or co-source work, acknowledging the need for external expertise, albeit with a tight leash on expectations for results.
The integration of automation and artificial intelligence (AI) is another strategy that CFOs are exploring for workforce optimization. A significant 42% of respondents expressed their intent to leverage AI, with a notable emphasis on generative AI (GenAI). Despite the rush towards AI adoption, Berson advised caution, urging CFOs to approach it like any other new technology – strategically determining business cases and focusing on value rather than succumbing to a fear of missing out.
The BDO survey also highlighted other organizational risks, including data privacy, supply chains, ESG, and tax legislation changes. However, Berson pointed out a specific risk for CFOs who may overestimate their prowess due to past successes, cautioning them against underestimating the formidable economic headwinds in 2024. The survey, conducted in October 2023, encompassed companies with revenues ranging from under $50 million to over $3 billion, with 80% having only U.S. operations.
