How today’s modern CFO can tackle economic uncertainty

How today’s modern CFO can tackle economic uncertainty

It’s not easy being a CFO. It never was, but today, amidst global turmoil and economic uncertainty, it’s harder than ever. In these economically uncertain times, everyone needs a helping hand. The good news is that CFOs are not alone. Technology has changed the way they interact and work. It can also change how they view data and provide a platform for better communication, greater trust, and improved collaboration. In this article, we share a few ways CFO's can tackle economic uncertainty and overwhelm, generally, and with specific reference to rebate management.

How the CFO role has changed – it’s no longer a back-office function

It has been many years since the CFO was last seen as a mere number-cruncher. Of course, numerical analysis, the ability to make accurate predictions based on current and past performance, and the need for accuracy are still critical responsibilities. As strategic finance and business advisors, CFOs must be able to prepare an organization for the future. However, a study by Accenture found that nearly three-quarters (72%) of CFOs are introducing non-traditional skills into the finance function, including business agility, analysis, value architecture, and even storytelling. In uncertain times a CFO needs to be able to read and interpret the numbers while forging a pragmatic future and bringing people along for the ride – bumpy or smooth.

Current economic uncertainty

With the annual inflation rate in the US at 9.1% in June 2022, the highest since November of 1981 (source: tradingeonomics.com), it’s hardly surprising that US-based CFOs are less optimistic about the future than they were six months ago. 80% cite the increased costs of goods and services as their reason for a negative outlook, and 50% expect to raise prices to mitigate inflation, according to Grant Thornton’s 2022 Q1 CFO Survey findings.

According to Bloomberg, companies are already responding, with Apple hitting the brakes on hiring amid economic uncertainty. Microsoft, Google, Intel, and Cisco are also dialing back on hiring in certain divisions.

In the UK, CFOs are even more pessimistic. The Deloitte CFO Survey: 2022 Q2 revealed that “on average, CFOs see a 63% chance of the UK going into recession within the next 12 months”. They see a sharp rise in financing costs, saying credit “is more costly than at any time in the last ten years.” CFOs also expect interest rates to double to 2.5% by June 2023.

Ways to tackle economic uncertainty and overwhelm

How should a modern CFO deal with economic uncertainty? The mark of a genuinely talented modern CFO lies in their ability to make predictions based on the available information at the time and then, more importantly, adjust those decisions when information changes. Deloitte suggests that CFOs can act as ‘early-warning systems’ – but this requires humility, a desire to pay attention to external signals (including using advanced tools like AI), develop hypotheses and read signals from experiments as quickly as possible, and the ability to use the combined intelligence of a cognitively diverse team.

They recommend taking these four steps to deal with economic uncertainty:

- Build scenario-planning muscles

- Establish and follow leading indicators

- Base action on imperfect data and

- Promote diversity and inclusion.

Is reducing margins, passing on price rises, and improving cash flow enough?

In these uncertain times, CFOs are responding to higher input costs by passing on price rises, improving cash flow management, and through a reduction in margins.

These steps are essential. But do they go far enough?

CFOs must make their businesses as recession-proof as possible. Steve Gallucci, National Managing Partner for the US CFO Program at Deloitte, reminds us that driving digital transformation, getting comfortable with communication, and adopting a creative mindset are fundamental to preparing for economic uncertainty.

Technology can support all these initiatives, but while managing cash carefully is a sound strategy, today’s modern CFO should also be searching for alternative revenue sources. One of which is a surprising source of hidden profits: Rebate management. Rethinking your rebate management strategy can optimize all revenue streams, minimize compliance risks and improve decision-making.

Rebate management as a tool to avoid economic uncertainty

Accurate reporting, automated real-time data and insights, and stronger departmental alignment benefit from a stronger rebate strategy. Read on to discover how these can be used as tools to tackle economic uncertainty.

- Automated real-time data and insights

Finance leaders no longer have the luxury of waiting for complete data before confronting uncertainty. As this Deloitte article explains, “...by the time CFOs have all the data they want, it’s generally too late to avoid attacks from competitors arriving from completely different industries, or to adopt the new cost-saving operational technology that others in the market have already brought on board”.

This used to be the case with rebates. Fortunately, connecting systems and improving reporting can remove delays. By gathering real-time data from various sources and delivering these insights to the rest of the organization, CFOs can drive collaboration while enabling better decision-making. If you haven’t already considered the value of implementing an effective rebate management system, it’s time to go digital.

- Stronger cross-departmental alignment

John Cullen, FCMA, CGMA, emeritus professor of management accounting at Sheffield University Management School, has wise advice about the benefits of better collaboration. He says, “Stop focusing solely on what's happening within your own department or organization, there are costs that can be reduced and value that can be added when supply chain partners actually talk to one another and share information. Instead, get engaged in the communications process and work to influence those factors.”

In uncertain times, “forewarned is forearmed.” When partners have trusted relationships, communication can flow more effectively. Effective rebate management improves collaboration, while stronger cross-department alignment enhances information sharing, reducing the risk of finding out unpleasant news too late.

- Accurate forecasting

A global study by Workday, “Organizational Agility at Scale: The Key to Driving Digital Growth,” found a strong correlation between enterprise-wide data access and the ability to quickly make informed decisions. More than half of their respondents indicated that access to data within their organization is somewhat accessible but remains outdated and siloed within functional teams.

The antidote is using precise, compliant, and transparent digital tools to forecast cash and liquidity and identify risks with greater speed and accuracy. Assessing an organization’s cash position and liquidity should be easy. However, it isn't possible in a world where rebates are still managed on spreadsheets.

If one considers rebates as an essential source of revenue, monitoring them regularly completes the organization’s financial picture. Tools like Enable’s rebate management software make this easy.

- Stronger rebate strategy

When rebates work well, they consolidate relationships between buyers, suppliers, and customers. They incentivize and then reward loyalty. And they foster mutually-beneficial business relationships. In uncertain times, improving relationships and communication pays dividends. But rebates must be managed effectively to produce these results. Treat them as a tactic, and they will remain a time-consuming yet unrewarding activity at best and a destroyer of relationships and trust at worst.

To tackle economic uncertainty and overwhelm, get your rebate strategy on the right path, and you’ll find, as NuLiv Science did, that relationships improve. That’s what their President, Richard Wang, expects to do with Enable. He says, “If we could go back to [our clients] and say here’s some value returned at the end of the year, hopefully, it’ll strengthen our relationship. We’ve also excited to gain an increased level of transparency and reduce human manpower tracking rebates.”

Recommended next steps

When the modern CFO has accurate, up-to-date data, an ability to oversee strong relationships, and confidence in their systems, it’s possible to tackle economic uncertainty with greater confidence.

If rebates impact your bottom line, it’s time to discover the SaaS platform that turns rebates and incentives into a strategic growth driver for B2B trading partners. Try Enable for free or schedule a demo.

Elizabeth Lavelle
Finance

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