Top 3 Challenges for CFOs Heading into 2023

The CFO role has expanded beyond financial duties to include strategic responsibilities across the company. With 2022 bringing much economic uncertainty, CFOs have also been focused on navigating volatile business conditions, supply chain issues, high inflation, and rising interest rates. 

As we learned in our Glynn Capital CFO Coffee Chat, CFOs are weathering the storm and remain positive that the economy will stabilize. Heading into 2023, CFOs are laser-focused on a few key areas including talent retention, accurate forecasting, and cost management. 

Talent retention

The CFOs from our Coffee Chat agreed that retaining talent is a top risk and concern for businesses: people are an organization’s biggest asset. Low satisfaction can lead to low productivity and low morale, which can quickly get an organization into a talent crunch. In addition, keeping morale high after RIFs can particularly be challenging as employees wade through uncertainty.

• Folks get anxious in this kind of environment; finance leaders have a responsibility to give context and be transparent
• Early and frequent communication with employees is critical
• Motivate and lead by sticking to the product roadmap for consistency and transparency
• Significant investments in culture and facilitating more in-person retreats can be helpful. There’s more opportunity for interpersonal connections and a sense of belonging.
• Transparency is the way to go. Keep people through honesty. Although the level of transparency is key, pick and choose where to be transparent while teaching and educating the executive team on how to communicate down to their team.

Accurate forecasting

There’s no playbook for forecasting during market volatility. CFOs need to use their experiences from the past year to help guide them into 2023. They also need to remain flexible and prepare for several different scenarios in their forecasting models.

• Revenue forecasts are getting harder, and 2023 is expected to be part “crystal ball” and part “darts on a wall”
• Attempt to put in a realistic revenue growth forecast that reflects the realities of the economy
• Scenario planning is key. Create multiple plans for board conversations
• Early and frequent conversations with the board with an 18 – 24 month plan can be helpful
• You still want to make progress in 2023, so make sure your business plan charters through that plan
• Redistribute where you are going to invest and focus on very targeted growth
• Cash preservation is now more important than growth and affects how you should build your 2023 plan

Cost management

As the economy slows and inflation remains a challenge, CFOs need to look toward cost management to maintain profitability. They need to be strategic about how to cut costs and will be looking for inefficiencies in the business.

• You need flexibility in the budget, but you also need the levers to pull things back if things get really tough
• Consider small pay increases – annual merit increase + promotion-related
• If you’ve had a reduction, you have to put everything in context with employees
• Go through vendors line by line to decide which are most critical
• Monthly flashes can be helpful for the board so they know where the company stands at all times rather than quarterly updates
• The venture debt route may be an option
• It’s nice to have a safety net when you have the money on the balance sheet – 1.5-2 years runway at a minimum

As CFOs venture into the new year, they will have to tackle many challenges while charting a path toward growth, cost management, and retention of top talent. However, if they are strategic and collaborate with the business to counter inflation and manage costs well, they can emerge from this period of volatility in a better and stronger position.

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