Finance Leaders Also Continue to Focus on Digital Automation to Shrink Significant Productivity and Efficiency Gaps
Gary Baker, Global Communications Director - (917) 796-2391 or [email protected]
Cost containment and cash flow optimization have jumped to the top of the priority list for finance leaders for 2024, in response to an uncertain economic outlook, potential for slowing or stalling of global growth, and the unprecedented confluence of inflationary price increases, rising interest rates, supply market challenges, and geopolitical instability, according to new Finance Key Issues research from The Hackett Group, Inc. (NASDAQ: HCKT).
Finance leaders will also need to do more with less operationally in 2024 because they expect to see a 5% increase in finance workloads and a slight decrease in staffing and operating budget, The Hackett Group® found.
Digital transformation remains a top five priority for finance in 2024, the research found. Technology investments are one area where spending will actually increase in 2024, driven by digital transformation and efforts to implement artificial intelligence (AI) and generative AI (Gen AI). Overall, finance leaders continue to focus on digital transformation, using technology investments to reduce costs and create new capabilities. Net adoption growth rates for both core and emerging finance technologies are expected to be strong in 2024, with the greatest growth in areas such as business process management (18%), virtualized data platforms (15%), digital workforce enablement tools (13%) and robotic process automation (13%). Gen AI growth of 9% is expected, with 41% of companies expecting to implement pilots or small-scale deployments.
While finance and other business functions are still in the early stages of exploring Gen AI, enterprise funding is expected to increase in 2024, the research found. The most promising opportunities for finance to benefit from Gen AI include account-to-report, management reporting and planning, and forecasting processes – areas where easy access to accurate data can greatly enhance the effectiveness of personnel. Many finance leaders also see an opportunity for using Gen AI in business performance support, including amplified analytics, intelligent task automation, conversational agents for service requests and natural language processing for translation of narratives.
Turning data into actionable insights, profitability goals and margin expansion, and digital transformation rounded out the top five finance priorities for 2024. Overall, traditional finance objectives dominate this year’s priority list, with six of the top 10 objectives in this category, including improving forecasting reliability (priority No. 6), regulatory compliance (priority No. 9), and capital investment allocation and deployment (priority No. 10). Despite persistent labor and talent issues, there is only one talent-related objective for 2024 – upskilling existing talent (priority No. 7). In most cases, finance executives are fairly confident in their ability to achieve these objectives. Areas of lowest confidence on the 2024 priority list include forecasting reliability, digital transformation, master data management and upskilling talent. In the cases of data and digital transformation, low confidence is likely due to the accelerating rate of change, the skills required to architect solutions, and the complex nature and span of effort required to make progress.
A complimentary version of The Hackett Group’s 2024 Finance Key Issues research, “The CFO Agenda,” is available, with registration, at https://go.poweredbyhackett.com/w28.
“Last year, growth was the clear top priority for finance leaders. But concerns over the global economic climate have driven a significant shift in their thinking,” said Senior Research Director Shawn Fitzgerald. “Growth didn’t even make the list this year, and cost containment and cash flow optimization jumped from the bottom half of last year’s list to the top two spots for 2024. Profitability goals and margin expansion also moved into the top five.”
Principal Tom Willman added that, “Finance leaders will face significant operational challenges in 2024 as well. While the projected productivity and efficiency gaps have shrunk somewhat since last year – down from 9% and 10% respectively to 6% – they are still significant. The good news is that the path to reducing costs is clear. Our most recent benchmark analysis shows that Digital World Class® finance organizations operate at about half the cost of their peers, which represents a $48 million advantage for a typical $10 billion company. One key to this is digital transformation, including high levels of automation for core transactions.”
“Finance must take a deliberate, sustainable approach to cost optimization rather than one-off belt tightening, and develop new ways to reduce costs,” Willman continued. “Finance organizations would be wise to explore generative AI as part of this, as it holds huge promise. Our recent research finds that generative AI could enable finance and other selling, general and administrative functions to reduce cost and staffing by up to 40% over the next five to seven years. Now is the time to be planting the seeds for this potential paradigm shift in delivery model and cost structure.”
The Hackett Group’s 2024 Key Issues research is based on results gathered from more than 375 executives in finance, procurement, supply chain, human resources, information technology, and global business services at a global set of midsized and large enterprises.
About The Hackett Group
The Hackett Group, Inc. (NASDAQ: HCKT) is a leading benchmarking, research advisory and strategic consultancy firm that enables organizations to achieve Digital World Class® performance.
Drawing upon our unparalleled intellectual property from more than 26,000 benchmark studies and our Hackett-Certified® best practices repository from the world’s leading businesses – including 97% of the Dow Jones Industrials, 89% of the Fortune 100, 70% of the DAX 40 and 55% of the FTSE 100 – captured through our leading benchmarking platform Quantum Leap® and our Digital Transformation Platform, we accelerate digital transformations, including enterprise cloud implementations.
The Hackett Group, Hackett-Certified, quadrant logo, World Class Defined and Enabled, Quantum Leap, and Digital World Class are the registered marks of The Hackett Group.
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