US finance executives show more interest in spending than amassing cash, seeing opportunities in the economy but also feeling the need to keep up from a technology and talent standpoint.
Compared with a year ago, CFOs are being more aggressive in spending, according to one measure of CFO sentiment. Another survey shows that US businesses are far more likely now than in January 2014 to disburse cash.
Sixty-seven per cent plan to increase overall spending, up from 63% a year ago, according to a survey by the CFO Alliance. Increased spending on employee wages and benefits continued its steady climb in the annual survey: 70% plan an increase this year, compared with 66% in 2014, 57% in 2013, and 52% in 2012.
Nick Araco is the CEO of the CFO Alliance, a network with about 5,000 members. He travels around the country, getting the pulse of finance chiefs, and he said CFOs are loosening the purse strings to keep existing talent or recruit new talent.
“They are more than willing to invest in their core business, and they are investing aggressively,” Araco said. “If they don’t have the talent, they’re going to take it from someone else, and they’re going to pay for it.”
Although technology spending is not projected to increase as widely as it did last year, it remains a priority for CFOs: 90% are either keeping tech spending the same or projecting a rise. Araco said the emphasis is particularly on disruptive technology that will better engage customers, such as business intelligence tools.
CFOs are maintaining a focus on business at home instead of abroad, with improved sentiment about the US economy and less optimism about the global picture. For instance, Araco said, CFOs in the survey are less focused on growing through mergers-and-acquisitions activity than they were in the past.
Cash outflows projected to increase
Corporate treasurers are strongly predicting their companies will deploy cash in the coming quarter, according to the Association for Financial Professionals (AFP). The AFP’s quarterly Corporate Cash
Indicators survey shows the lowest reading of expected cash holdings since it began tracking the indicators in 2011.
The indicator is at ‒14, down 11 points from the previous quarter and 13 points from a year ago.
“Despite recent scares in Europe and Asia, US businesses will spend cash this quarter,” Jim Kaitz, AFP’s president and CEO, said in a news release.
Thirty-three per cent plan to reduce cash holdings this quarter, and 20% plan to increase cash balances, according to the survey of more than 200 companies.
Related CGMA Magazine content:
“Cash Management Shift Boosts M&A”: Businesses worldwide are accumulating and spending more cash,
mostly on mergers and acquisitions, according to four years of research by SunGard. The shift in corporate cash management is also raising new challenges, most of them strategic.
“US Economy on a Roll, According to Survey of Finance Executives”: Economic optimism is up from a year ago, led by brighter projections in revenue, profits, and hiring, according to the latest quarterly survey of finance executives in business and industry by the American Institute of CPAs.
—Neil Amato (firstname.lastname@example.org) is a CGMA Magazine senior editor.