Recession Drives CFO Cost Cutting Agenda
Given the current economic climate it will likely come as no great surprise that executives at small and mid-sized firms are paying a lot of attention to cost cutting. Faced with a no-growth outlook, many are refocusing their attention on driving out costs from their businesses wherever they can find them.
The survey was conducted by CFO Research Services in November. The results were based on responses from 129 senior finance executives from companies with revenues of from $10 million to $2 billion.
Cost control was considered something to spend more time on (61%), improving business processes (61%) and financial analysis (58%). Trailing the list were environmental impacts of business (12%), outsourcing (14%) and finance recruiting (15 percent).
When asked which financial skills they deemed most important, respondents answered:
- Financial analysis (58%)
- Planning and budgeting (54%)
- Communication (54%)
- IT expertise (40%)
At the bottom of the list during these hard times: Sarbanes Oxley compliance (11%), complying with new interactive data filing systems (13%), and keeping up with FASB and GAAP (22%).
When asked to rank the importance of liquidity management activities in light of recent changes in the financial markets, the executives overwhelmingly picked improving working capital processes and forecasting cash flow as their top priorities. Finance executives are turning away from complex financing schemes and getting back to basics - taking costs out, running lean and efficiently, optimizing working capital, and keeping closer tabs on financial performance.
Strategic companies are also evaluating whatever tools they have available to ensure their companies maintain the cash flow required to continue business operations. Many respondents said they are exploring more creative, “one-off” types of actions to reduce liabilities and free up cash. Some said they plan to sell off less-productive or short-term assets, while others are looking to alternative financing arrangements (such as refinancing and leasing) to increase liquidity and optimize cash flow.
As for future economic performance, most (35%) see continued slowdowns for the next six to 12 months with 26% expecting a slow down for only six more months. Interestingly, even in the face of this recession, a significant number of respondents said they are looking to grow market share, largely by targeting weakened competitors.
