CFOs plan to cut costs to deal with inflation

Chief financial officers will increasingly turn to cost reductions if above-average inflation continues into the fourth quarter of this year, according to a survey released Thursday by Gartner, while finance chiefs also plan to try for efficiency gains through increased automation.

Up to now, CFOs have largely been relying on raising prices as their main strategy for coping with high levels of inflation, but they recognize this strategy is unsustainable if inflation persists long-term, according to a survey this month by the research firm. 

Inflation has reached a 40-year high this year, with the U.S. Bureau of Labor Statistics’ Consumer Price Index rising only slightly in April to 8.3%, compared to a year ago, only a slight improvement from the 8.5% rise in March.

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“CFOs are receiving feedback from customers that the limit to price hikes is near,” said Alexander Bant, chief of research in the Gartner Finance practice, in a statement Thursday. “This reality has already set the planning process in place for other strategies, most notably cost reductions and enhancing digital capabilities for increased use of automation.”

Just over half (54%) of survey respondents said price hikes remain their top tool for now, but only 25% expect to continue to rely on price increases if high inflation persists into the fourth quarter of the year. The trend was reversed for cost reductions, with only 20% of respondents currently preferring the strategy as their main tool, rising to 39% if inflation continues. 

Automation will remain a consistently viable primary action for about one-fourth of the CFOs surveyed over the short and medium term, with interest in this strategy slightly increasing if inflation persists. Automation and price increases were chosen by a nearly equal number of respondents as the top action they plan to combat inflation, if needed, in the fourth quarter.

“CFOs are increasingly looking to the long-term benefits of digital investments, including automation, that can permanently reduce the cost of doing business,” Bant stated.

Previous Gartner research has shown how CFOs can use technology investments to reduce the cost of doing business while increasing profitable growth through a process it calls “digital deflation.”

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