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Despite optimism, CFOs remain wary of Debt and Equity financing in Q1 2024

Despite optimism, CFOs remain wary of Debt and Equity financing in Q1 2024
on March 21, 2024
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While CFOs closed out 2023 with a conservative outlook, the latest research from Deloitte shows a significantly more positive view of both the global economy’s prospects and how CFOs expect their own businesses to fare in 2024. 

Despite a general uptick in optimism, however, CFOs face growing headwinds when it comes to cost and capital management, innovation and growth, and execution and efficiency—to say nothing of how global economic pressures are impacting decisions around financing.

We’ll break down what’s driving this mixed-bag of cautious optimism among global financial leaders, the unique economic factors impacting CFO decision making in 2024, and actions finance leaders should take today to prepare for what the rest of the year has in store.

About: Despite optimism, CFOs remain wary of Debt and Equity financing in Q1 2024
CFOs are more positive about the economy and even their own businesses in 2024, but remain apprehensive about the state of equity and debt financing.

CFO Optimism grows slightly, while Pessimism plummets

Of the 116 financial leaders polled across five industries in the 1Q 2024 CFO Signals Survey, the number of respondents who were More Optimistic about their own company’s prospects jumped to 42 percent compared to 38 percent in the previous quarter. 

Perhaps more telling, the percentage of CFOs labeled as More Pessimistic shrank from 27 percent in Q4 2023 to only 11 percent during Q1 2024

The TL;DR? Net optimism has more than tripled among respondents quarter-over-quarter, hitting a +31 score among CFOs polled in the latest research compared to just +11 in Q3 2023. 

To put a finer point on it, CFOs haven’t been this optimistic since the pandemic investment boom of Q4 2021, when Net Optimism was tagged at +35.

But things are hardly one-to-one for Q4 2024 compared to the same period three years ago. 

Aside from continuing volatility on the global geopolitical front, CFOs are flagging significant and acute challenges to their own businesses that are tempering otherwise enthusiastic outlooks. 

Debt and Equity financing remains a tepid prospect

For one, the attractiveness of Debt and Equity financing today is nowhere near the almost 90 percent and 60 percent (respectively) consensus felt among CFOs back in 2021. 

Instead, only 37 percent of respondents think Debt financing is attractive for their business, while Equity financing has plummeted to just 18 percent among respondents in the latest quarter. 

Split among the different industries polled, viewpoints around both financing options varied, but remained well below their pandemic highs, ie:

  • Among CFOs at public companies, 35 percent view Equity financing as attractive, while 22 percent favor Debt financing
  • For privately held firms, 42 percent of CFOs are attracted to Equity financing, while just 11 percent are open to Debt financing.

While Geopolitics (42) was cited as the leading factor influencing CFO attitudes in the context of financing, Macroeconomics (32)—that is, concerns around a potential recession, federal spending, and government deficits in the U.S. and Canada— was the second most prevailing source of insecurity among respondents. 

In that same vein, Interest Rates (17) stood apart from both Macroeconomics and Politics as their own cause for concern. 

As we’ve mentioned previously on the blog, in both the U.S. and Canada, federal leaders are standing firm on maintaining interest rates at some of their highest levels in decades to help battle inflation. 

While Federal Reserve officials in the U.S. are still committing to rate drops later in 2024, businesses will continue facing some extremely tight lending conditions in the short term.

Greater efficiency, capital diversity to drive growth

As much as external economic factors are at play here, there are significant internal hurdles holding back CFOs from expressing more enthusiasm about their prospects. From cost and capital management to effectiveness and efficiency—and even the ascendency of new tech and the associated skills gap that can introduce—CFOs are facing a rash of new challenges today that didn’t even exist just half a decade ago. 

The silver lining for CFOs is that there are actionable steps they can take to fortify their business on all of these fronts. 

For starters, Talent and Retention—flagged as the top concern among 44 of respondents—is an issue across departments, but especially within finance, where a continued accountant shortage has forced many teams to be slimmer than ever. 

Fortunately, new technology—including artificial intelligence—is helping to fill in some of the gaps without introducing a high “barrier-to-entry” that often comes when introducing new tools into legacy systems. 

In that same vein, CFOs can (and should) start leveraging automation within their workflows that more meaningfully drive the effectiveness and efficiency they crave on their own teams.

With an effective automation strategy in place, CFOs can then focus squarely on tackling their most prescient cost and capital management challenges, thanks to easier access to the data they need to understand the ROI of their investments and areas for optimization.

Innovation, however, is another top concern among CFOs, who are acknowledging “growth pressure and increased competitive intensity” as a leading impediment to growth. Much of this can be attributed to an inability to finance new product development or staff R&D teams, which can be an even larger threat to the organization’s long-term prospects than even immediate economic pressures. 

A system of intelligence to drive optimization, non-dilutive financing—and ultimately innovation

By aligning key project, financial and payroll data into a single platform for analysis, CFOs can take actionable steps that will improve productivity, save their company money, and unlock real-time analysis of their financial data. 

With these insights in hand, CFOs and finance teams can embark on more informed decision-making and effective financial planning, helping increase agility across the organization and ultimately extend their business’ runway.

At the heart of all of this is unlocking access to non-dilutive funding that can help financial leaders finance their operations without relying solely on Debt of Equity financing.

This opens up the door for businesses to push the gas on aggressive innovation and R&D initiatives that can help drive competitive advantage while even opening up new opportunities for financing, ala R&D tax credits. 

At Boast, our AI-powered platform allows startups at any stage to sync the systems they use to manage financial, payroll and workflow data into a single source of intelligence. From there, teams can actively understand what activities could qualify for R&D tax credits, for instance, while also actively tracking all of the relevant information necessary to file a claim in one spot. 

Boast goes beyond providing guidance on non-dilutive government funding, too. Our solution offers businesses a comprehensive resource that combines expert guidance and cutting-edge technology to optimize their R&D efforts, streamline capital management, and visualize a successful capital strategy.

Talk to an expert from Boast today to learn more about how we combine cutting edge technology with years of expertise—and a founder’s POV—to optimize your R&D and fund your innovation.

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