Financial forecasting is often the key to a successful year.
But planning ahead isn’t easy, especially in such volatile times. Business leaders face challenges such as supply chain disruption and fluctuating interest rates, plus wide-scale adoption of AI technology. On top of all this, you have the normal internal factors that affect every business, such as cost management and strategic investment.
For these reasons, many CFOs use the mid-year as a moment to review their financial forecasts and prepare for a strong finish to 2024. Here are some of the factors to consider when you’re looking at the road ahead.
1. external economic challenges
Businesses have survived a series of shocks since the beginning of the decade. Last year saw a spike in inflation and interest rates, plus significant downsizing events at major tech companies.
According to TD Economics, the Canadian economy is expected to receive a boost from lower interest rates, although overall economic growth is projected to be restrained as consumers, burdened by debt, make necessary adjustments.
Deloitte suggests that Canada is on track to avoid a recession and may even start to recover from its current downturn by the latter half of this year.
Of course, a lot depends on world events. The global geopolitical situation remains volatile, which could impact markets, supply chains and consumer sentiment.
All these factors are beyond the CFO’s control. Instead, finance leaders should focus on building business resilience and ensuring they’re ready for whatever lies ahead.
2. new opportunities for cost optimization
Cost management is a key part of business resilience. Right now, CFOs are continuing to look at ways to find efficiencies and reduce expenses, especially with the help of cutting-edge technology.
Some tech-driven cost optimization strategies include:
- streamlining business processes by using artificial intelligence and machine learning
- reducing labor costs by extending remote and hybrid work programs
- employing predictive analytics to improve financial forecasting and resource planning
Technology plays an important role in other cost-management strategies, such as budget reviews or workforce reorganization. CFOs require high-quality data to help identify efficiencies — and to highlight the areas that require further investment.
3. deploying new AI services
Artificial intelligence is becoming part of everyday life, with 33 percent of office workers saying they’ve used generative AI tools in their jobs and 55 percent expressing a desire for more training. This is good news for CFOs, 80 percent of whom plan to embed AI in their processes over the course of 2024.
AI is the latest phase of the ongoing digital transformation journey. As most CFOs know, digital transformation projects can present some major challenges, such as:
- recruiting and upskilling staff to work with new digital tools
- developing new processes to maximize the value of digitization
- implementing controls to reduce risk and meet compliance requirements
AI adoption poses the same challenges, plus artificial intelligence is an emerging technology, and therefore not yet 100 percent reliable. CFOs, CIOs and other stakeholders need to proceed with caution when making decisions about AI investment.
4. dealing with talent shortages
Again according to TD Economics, Canada's job market will continue to cool in 2024, but it should hold up better than in previous cyclical downturns. Overall, this means hiring plans should proceed as expected for the end of the year.
However, most employers are facing talent shortages in highly skilled positions, especially in areas like finance and IT. This has implications for business strategy, but it also directly affects CFOs, especially if you intend to build your team’s capacity and integrate new technology.
If your plans depend on hiring skilled people, there are some important steps to take now:
- Work with recruiters to create candidate profiles for your must-have employees.
- Explore options for upskilling and retraining your incumbent team members.
- Look at consultancy options to fill urgent skills gaps.
Talented people are always in demand, which means talent shortages will always be an issue to some extent. It’s a good idea to work with your recruitment team to build a reliable talent pipeline. You can also build a relationship with a trusted partner who can deliver skilled consultants when you need them.
5. new compliance and reporting requirements
Companies continually encounter evolving challenges in meeting regulatory requirements. Canadian organizations now must comply with the Fighting Against Forced Labour and Child Labour in Supply Chains Act, enacted in 2023. This legislation mandates that Canadian-linked entities publicly disclose their efforts in the preceding year to mitigate the risk of child or forced labor in their supply chains.
Additionally, Canadian organizations must stay vigilant regarding two emerging developments: new SEC rules on climate-related disclosures and the forthcoming Canadian Sustainability Disclosure Standards.
For CFOs, the main challenges here are:
- staying on top of regulatory changes and understanding how such changes might impact long-term strategy
- looking for ways to automate and streamline internal controls by using artificial intelligence
- identifying opportunities that might arise from shifts in the regulatory landscape
Staffing and digital transformation both play an important role in regulatory compliance. It’s easier to stay compliant if you’ve got the right data, the right reporting tools and the right people to help you navigate the rules.
6. cash flow and liquidity concerns
Looking ahead to the latter part of the M&A outlook, there is reason for optimism. PwC Canada's Deals practice expects an uptick in deal activity in the near future, driven by the stabilization of deal flow volume and positive trends in leading mergers and acquisitions (M&A) indicators. Similarly, MNP forecasts that the M&A market will heat up throughout 2024, as interest rates are expected to decrease and private equity firms feel pressure to deploy excess capital.
However, PwC cautions that M&A activity could face challenges: ‘’Factors such as the outcome of the US elections, particularly concerning investments in Canadian electric vehicle supply chains, and the potential increase in Canada's capital gains tax, might dampen enthusiasm for selling businesses post-transition period, potentially leading to increased selling activity in the short term’’
These developments could pose near-term concerns for CFOs, impacting access to working capital and potentially affecting creditors. Finance leaders should proactively consider strategies to mitigate liquidity risks and fund upcoming investments. Actions may include:
- optimizing accounts receivable processes to enhance cash flow,
- negotiating extended payment terms with suppliers,
- and exploring alternative financing options like asset-based lending or factoring.
If access to capital is likely to impact long-term plans, the leadership will need the CFO to offer further guidance. This is why it's crucial finance leaders have an accurate, data-driven understanding of the organization’s current financial resilience.
7. cybercrime prevention
Hackers can do enormous damage to a business. As well as the material cost of dealing with a breach, your company may also face reputational damage, regulatory fines and legal liability. The rate of cybercrime continues to increase, and cyber attacks are expected to cost over $10 trillion in 2025.
Finance teams are responsible for many of the internal controls that can help prevent crime and fraud, which means CFOs play a vital role in cybersecurity. Some of the main concerns this year include:
- ensuring new IT vendors (such as AI companies) meet security standards
- assessing potential risks from remote and hybrid working patterns
- conducting audits to identify malicious activity, such as hacking, data theft or unauthorized access of customer records
Cybersecurity is no longer the exclusive domain of the CIO or Head of IT. Cybercrime is an existential threat to the entire company, so the entire leadership team must work together to keep your data safe.
8. managing stakeholder relationships
CFOs play a crucial role in their organization, providing a mix of data-driven insights and strategic vision. The CFO also influences key decisions, such as staffing, IT investment, marketing and operations.
In volatile times such as these, the CFO’s relationships with other stakeholders are more important than ever. People will look to the finance leadership for answers to questions like:
- How will market volatility affect our future business plans?
- Is the company resilient enough to withstand any shocks?
- Is the company in a good position to take advantage of any new opportunities?
- How will technology such as AI impact business processes?
- Will there be any major staffing changes in the future?
Accurate data can help CFOs give useful answers to questions such as these. Even where there’s uncertainty, it’s important to have open and transparent conversations about the main challenges facing the business.
