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The following is a guest post from Alex Triplett, CFO and COO at Appfire. Opinions are the author’s own.
Bạn đang xem: 5 budgeting strategies for CFOs navigating economic uncertainty
Ask any CFO and they’ll tell you they are used to navigating unpredictable economic conditions, from rising inflation and fluctuating interest rates to volatile market conditions. While uncertainty isn’t new, the way CFOs address it continues to evolve as companies are pressed to be more adaptable.
So how can CFOs adapt their financial strategies to ensure resilience and enable their organizations to maintain growth? Here are five actionable tips on how to stay resilient and drive growth while managing budgets during periods of uncertainty.
1. Understand the current economic environment
Before any budget planning or new initiatives can begin, it’s essential to evaluate the current economic environment to remain vigilant and adaptable. It is the CFO’s responsibility to identify the broader economic activities that could potentially impact an organization’s financial trajectory.
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Start by analyzing the macroeconomic trends that impact your organization’s industry. This includes looking at everything, from interest rates to the latest innovations like AI, and assessing how it is collectively shaping the market. According to Deloitte, the macro concerns that are top of mind for CFOs right now are geopolitics (56%) and the overall economy (41%). Understanding how these factors will impact business can help CFOs form more accurate forecasts and guide strategic decision-making before putting pen to paper.
2. Stay agile, not rigid
Ditch the traditional budgeting frameworks. Given how quickly the economic environment can shift, static annual plans are outdated before the fiscal year even begins. CFOs should focus on building flexibility into financial frameworks to avoid being caught off guard when external conditions change.
Rolling monthly or quarterly forecasts and robust contingency plans allow organizations to stay proactive rather than reactive. By building in flexibility, organizations are better positioned to adjust spending, reallocate resources and explore new opportunities without feeling constrained by an outdated budget. In fact, Gartner found that 72% of CFOs prioritize building flexibility into their budgeting plans to better manage the fluctuating economy.
3. Combine top-down and bottom-up strategies
Choosing between top-down and bottom-up approaches can significantly impact resource allocation and decision-making. Each has strengths and weaknesses, so the key is to apply both to support an organization’s goals.
In a top-down approach, the team sets a budget target and allocates resources across departments based on strategic priorities. This method can be efficient in ensuring resources go toward high-level objectives and the spending aligns with the organization’s goals. However, top-down budgets can sometimes miss supporting specific departmental needs because they lack detailed input that solves certain ground-level challenges and opportunities.
On the contrary, a bottom-up approach starts at the department level and requires each department to submit budget proposals based on their anticipated needs and goals. This method provides a more granular perspective which can lead to improved accuracy and accountability, but it also takes more time and introduces the risk of departments requesting more resources than necessary.
Combining elements from both methods enables an organization to set high-level priorities and incorporate department-level insights to inform decisions with front-line perspectives.
4. Leverage data
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Organizations that effectively leverage data for budgeting tend to see a 5-6% increase in profitability compared to their peers that don’t.
In today’s digital world, technology has become an invaluable ally in the budgeting process. By harnessing advanced data analytics tools, insights can be quickly analyzed and taken into consideration when making financial decisions.
Platforms like Snowflake, which Appfire uses, centralize data from every part of the organization so teams can easily identify patterns, track financials, and gain insights into customer trends and product performance. This provides deeper insights into financial performance, customer behavior, and market trends, which enable CFOs to make more informed decisions than ever before.
5. Involve every department
Budgeting requires an understanding of the organization’s full picture, which is why it’s essential to collaborate with departments across the entire business. During times of uncertainty, the knowledge and perspectives of those conducting the day-to-day operations are the most valuable resources. Encouraging open communication across all teams provides a well-rounded view of where resources are needed the most and insight on potential risks or opportunities that might not be inherently visible at the executive level.
Involving department leads in the budgeting process is crucial to understanding what’s happening on the ground and where resources are truly needed — and can be a key driver of organizational success. Collaboration can increase sales by 27%, highlighting the tangible benefits of integrating insights from every level of the organization to achieve strategic goals.
Budgeting through economic uncertainty is no small feat. CFOs are challenged to create budgets that are both resilient and adaptable, which requires looking beyond the numbers. From understanding the current economic environment to leveraging data and involving the perspectives of department leads, today’s financial leaders must remain agile to make sure their organizations are prepared for any scenario.
Budgets are also most effective if they are the entire company’s, not just the CFO’s or the C-suite. A collaborative and collectively owned budget is crucial to drive alignment and accountability.
The CFO’s role today is as much about empowering teams to act strategically as it is about the numbers. By leveraging real-time insights and taking a collaborative approach, CFOs can seamlessly navigate change and make proactive, strategic decisions that position their organization for sustained success.
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