Half of CFOs predict higher operations costs in near term, survey finds

Finance leaders predict rougher seas ahead when it comes to operations costs.

Half of the 273 finance leaders who responded to Grant Thornton’s Q1 CFO survey said they expect operating costs to increase over the next year, which marked a 12-percentage-point rise from the previous quarter and tied the high-water mark for the accountancy’s quarterly survey.

Organizations are feeling the sting of higher shipping costs due to attacks in the Red Sea, Paul Melville, Grant Thornton’s national managing principal of corporate finance, said in the report. CFOs’ confidence waned by 11 percentage points from the previous quarter when it came to meeting their supply-chain needs, the survey found.

“People are having to pay more to get goods delivered. That’s a cost that has risen over the past few months,” Melville said in the report.

Spend or save. A majority of respondents predicted spending will increase in IT/digital transformation, cybersecurity, sales and marketing, and workforce compensation and benefits over the next 12 months. Travel is the area where organizations appear to be cutting back the most. Just over a quarter (26%) of respondents said they expect to spend more on travel, while 21% expected spending to decrease in the next year.

Nearly half (47%) of respondents said their organizations are using generative AI, a record for the survey. A majority of firms use the technology for data analytics and business intelligence (66%) and financial operations and processes (54%).

Economic optimism. The survey also found strong optimism among CFOs about the economy. Just over a third said they were “very optimistic,” an 11-quarter high for the survey. Meanwhile, the 12% of respondents who said they were pessimistic about the economy tied an 11-quarter low. Jim Wittmer, Grant Thornton’s national managing partner for tax growth, said expectations of lower interest rates played a role in respondents’ optimism.

“The confidence reflected in the CFO survey is very consistent with the client and prospect interactions we’re having right now,” Wittmer said in the report.

Recent inflation data and Federal Reserve commentary may throw cold water on that optimism. After the Bureau of Labor Statistics revealed core inflation of 3.8% YoY in March, market analysts shifted expectations to just one or two rate cuts this year, down from six or seven cuts just a few months ago, the Wall Street Journal reported.

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