Stan Lepeak, Managing Director, EquaTerra Global Research

This is the second in an ongoing series of blogs presenting the findings from a recently completed EquaTerra market study assessing North American and UK finance and accounting (F&A) and F&A outsourcing (FAO) market trends. EquaTerra released the results of this market study via a webcast held on January 28^th. The first blog reviewed the key items on organizations’ corporate agendas for 2010. Individual CFO and F&A group agendas must take into account and reflect the initiatives defined in overall corporate strategies.

The market study identified the critical items, issues and goals facing organization’s finance and accounting group today, i.e., the top items on the CFO’s agenda. Respondents selected their top three most critical issues and ranked them in order (see figure).

• The most frequently identified issue facing CFOs and their F&A organizations is driving corporate cost cutting efforts, cited by 45 percent of all respondents. This is followed closely by supporting the overall corporate strategic agenda, identified as a top goal by 40 percent of all respondents. While cost cutting is a common corporate challenge, it is not necessarily the most important. There is a danger of disconnect with the overall corporate agenda if the F&A function focuses on cost cutting at the expense of other strategies such as growing the business.
• The most important challenge cited was improving the internal controls environment, scoring a 1.75 on a one to three scale where one is the most important challenge identified. This is followed closely by achieving overall F&A functional transformation and preparing for the upturn coming out of the regional/global economic recession/depression. The scoring spread among the top six most highly ranked CFO agenda items is very narrow, ranging from 1.75 to 1.95. This highlights that CFO’s face a broad range of competing issues and goals, some potentially in conflict with one another.

There are some variations in response levels.

• Fifty-eight percent of respondents in organizations with $20B+ revenue identify driving corporate cost cutting efforts as the top issue facing CFO’s, compared to 38 percent of respondents from organizations with $3-$10B in revenue.
• Larger organizations (30 percent compared to overall study levels of 19 percent) are more likely to cite improving the internal controls environment.
• US respondents are more focused on cost cutting within F&A operations compared to those in the UK, with 35 percent compared to 17 percent identifying reducing the overall spend on F&A operations as a top agenda item.

These market study findings highlight that many CFO’s are in a tough spot. Driving cost cutting efforts – and cutting F&A costs along the way – while simultaneously supporting corporate strategic agendas that include goals, such as growing the business and competing against new competition, can easily lead to establishment of agenda items that are at cross purposes. The challenge – as always but more so in today’s environment – is to do more with less. It is also to continue to drive new ways and means to conduct the business of F&A.

Next up: key strategies to enable the CFO agenda.

Filed under: Finance & Accounting, Market Trends and News, Outsourcing by EquaTerra