Majority to reinvest cash rather than increase cash reserves
NEW YORK; July 18, 2013 – Senior finance executives and CFOs are cautiously optimistic about revenue growth, but are concerned by market uncertainty and its impact on their ability to predict and manage business performance, according to a new global study by Accenture (NYSE:ACN).
Sixty one percent of responding senior finance executives are projecting annual revenue growth of 5 percent or more by 2015, and one quarter of the executives expect annual growth of at least 10 percent. Accenture surveyed 1,250 senior finance executives, of whom 24 percent are CFOs, across nine major economies.
Nearly half (45 percent) reported that they are more optimistic about prospects for their company’s growth this year compared to last, while 28 percent expect growth to remain stable and 27 percent are less optimistic about this year’s growth prospects. However, there were differences by country with optimism being greatest in Brazil and India. Executives in the UK were the most inclined to say that they were less optimistic this year than last.
Growth optimism compared to last year
Despite the broadly positive outlook, senior finance executives say that economic uncertainty, commodity prices, volatility and shifting customer expectations are having the most impact on their ability to forecast business performance. And according to 82 percent of finance executives, they only have visibility of half or less of the information they need to predict the performance of their business.
“Although CFOs expressed optimism about their prospects for growth, that euphoria is tempered by their inability to forecast their performance, particularly given the economy and other market drivers that remain in flux,” said Don Schulman, global managing director of Accenture Finance & Enterprise Performance. “But as architects of growth, CFOs seek to drive their transformation agendas; the entire business can gain as finance leaders deliver timely, actionable data that can improve decision making in an uncertain environment.”
Finance priorities for the future
As finance executives plan what their finance function investments may be over the next two to three years, their top priority is lowering their costs and increasing their productivity, as shown in the chart below.
More specifically, 64 percent of finance executives said they would invest in finance skills and/or systems to support planning, budgeting and forecasting. Thirty-seven percent aim to improve visibility of revenue and expenses and 35 percent will invest in systems to support business analytics.
When asked what they would do with cash reserves, less than one out of four executives surveyed (23%) said they would hold their cash. Executives most frequently indicated that they would in part reinvest in their business and/or fund acquisitions (79%). In fact, 60 percent of the executives said either a combination of organic and / or inorganic growth would be their company’s primary driver of growth this year.
How finance expects companies to use their cash
Although some companies will always hold their cash, the responding finance executives understand the downsides of holding large cash reserves. The risks of holding cash most frequently identified by the finance executives are limiting innovation and new product development (52 percent) and holding back growth opportunities (49 percent). Finance executives also say holding cash risks limiting market share expansion (46 percent), geographic expansion (42 percent) and new market entry (40 percent).
“CFOs, pursuing growth, appreciate the importance of investing cash wisely, but they need clearer visibility of their business to make confident use of resources,” said Schulman. ”Given the high levels of corporate cash reserves seen in many markets around the world in recent years, it’s clear that CFOs who have access to reliable information will be best placed to use that cash with greater precision to generate a higher returns on investment.”
More information is available about the study at www.accenture.com/CFO-Growth-Optimism.
Accenture is a global management consulting, technology services and outsourcing company, with approximately 266,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.
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