The more things change, the more they stay the same. That’s certainly the case for interest rates in the US, with a serious sense of Groundhog Day setting in after the most recent US Fed interest rate decision. The Federal Reserve unanimously voted to hold rates steady for the seventh consecutive time.
That leaves the Fed Funds Target Rate unchanged at 5.25% to 5.50%. Fed chairman Jay Powell acknowledged the committee has seen “modest further” inflation progress, a notable shift from his prior statement indicating there was a “lack of further progress”.
But while progress has been modest, the data shows that the economy is experiencing slow, but steady growth. All things considered, that’s good news.
However, it’s clear that CFOs will have to contend with elevated inflation and interest rates for the foreseeable future. That means they must prioritize initiatives that keep their businesses resilient and flexible in the face of uncertainty.
In this article, we’ll outline key strategies CFOs can consider to help their organizations navigate the muddy waters ahead.
Rate Forecast for 2024
One thing that has changed is the likelihood of multiple rate cuts for the rest of the year. After the Feds March meeting, the dot plot suggested we were going to see up to three rate cuts by the end of 2024.
Now that’s dropped substantially, with the expectation of just one cut by the end of the year. The phrase “stay alive ‘till 2025” is doing the rounds for a reason, with four cuts now expected in 2025.
How CFOs are Responding To the US Fed Interest Rate Decision
Uncertainty generally means a closer grip on the purse strings to maintain as much liquidity and flexibility as possible. But at the same time, expectations for CFOs and their teams are at an all-time high.
It’s become a major cliche, but the focus is on doing more, with less. With that in mind, it’s no surprise that technology is playing a bigger role in forward planning in the CFO office for the coming year. In fact, while overall spending is being carefully managed, tech investment is up 3.8% in Q2 2024 according to the American Institute of Certified Public Accountants (AICPA). That’s the highest increase in over two years.
This increased focus on tech implementation also means that there’s far more time being taken up by it. A recent PwC Pulse Survey found that 58% of the CFOs surveyed are spending more time on technology investment and implementation compared to a year ago.
44% of the CFOs surveyed by PwC said increasing the use of tech to reduce costs is very important to fund in the next 12 months, and almost half (46%) are prioritizing technology implementation right now.
So is it all good news? Tech investment is up and resource requirements are down? Well, not exactly. Data from both PwC and the AICPA suggest that these digital transformations aren’t yet translating to major savings in time or money, at least in the early stages of investment.
The key then, appears to be some missed opportunities for CFOs to implement technology in a way that provides immediate ROI, rather than investing in projects that may take years to fully realize.
Getting this right means focusing investment on the right type of technology.
Technology to Bridge the Gap
Focusing on legacy technology platforms like ERPs or TMSs comes with a massive upfront investment and a lengthy implementation process. There’s also the need to engage with third-party consultants, which adds even more complexity into the transition.
It’s no surprise that so many CFOs aren’t seeing immediate benefits from their capital expenditure on digital transformation.
But there’s now a growing segment of modern, cloud-native treasury software that has been designed to operate in a ‘plug and play’ method through the use of APIs.
APIs in brief
We’ve spoken at length about the benefits of open banking APIs for CFOs and Treasurers, so we’ll just quickly cover the basics here. APIs allow different software programs to talk to each other. For banking and finance, that means the ability to aggregate real-time banking data from multiple different banking portals, into a single third-party platform.
Because the data is a direct mirror, there’s no manual input. The result is data that is 100% accurate, visible in real-time, and highly flexible in terms of reporting, forecasting and payments capabilities.
“With Trovata the data is normalized and we now have a single source of truth where we can see everything we need to see. We are no longer manually logging into multiple portals and then spending hours aggregating that information. Trovata saves us so much time and enables us to focus on analysis and adding value.”
Mary Desmond, Director of Financial Operations at Sealaska Corporation
Flexible and powerful forecasting and analytics
With APIs forming the basis for extensive data capture, platforms like Trovata put analysis and forecasting at the heart of everything.
While many legacy systems have some limited forecasting capabilities, the file based data format limits the amount of data that can be transferred. Because APIs provide access to all the banking data available, forecasting and analysis can be far more extensive. Trovata combines multi-bank data aggregation with sophisticated search capabilities, and automated transaction tagging.
This makes it far easier for finance teams to find specific pieces of data, conduct detailed scenario planning and forecasting, and build customizable reports on just about any metric imaginable.
But the real benefit of this method is the implementation timescale, which can be measured in days, not months. It offers CFOs the ability to leverage their tech investment in a way that provides immediate ROI.
That’s incredibly valuable with the next 12 months we’re facing.
“We started with one of our primary banks and set up an account on their developer portal, Trovata got access and the data started flowing. It took a week or two. The process was quick and super easy!”
Bruce Edlund, Assistant Treasurer at Cloud Software Group
6 Ways Tech Can Help CFOs Navigate Uncertainty
That’s the high level view of the tech, but let’s take a look at some of the specific ways modern treasury platforms like Trovata can help CFOs and Treasurers enhance their capabilities to navigate the uncertain market.
Better Cash Visibility
With Trovata, CFOs can achieve a single source of truth by consolidating multi-bank data in one place. Simply put, you can see all of your cash balances, across every bank and every subsidiary, on a single dashboard.
This data is already normalized, eliminating the need for manual consolidation. Removing the time it takes to gather all of your banking data, providers more time to analyze it and make informed strategic decisions.
Improved Governance and Control
Many multi-entity companies are forced to hand off certain aspects of management and oversight for practical reasons. Lengthy data gathering and reporting processes can make it impractical to report to senior executives, making it more efficient to delegate to regional or individual entity leaders.
But of course, this poses a risk to the business, with CFOs unable to be across every detail. Trovata can solve this, by enabling CFOs to manage reporting and forecasting for each entity, without the need for time-consuming manual processes.
This is particularly beneficial for organizations with global operations, as it ensures compliance and uniformity across all regions.
Enhanced Preparedness with Forecasting and Scenario Planning
Trovata can help you see the future. Well, maybe not quite, but regular forecasting and scenario planning can at least help you understand how changing assumptions or performance could impact operations.
Taking a proactive approach can cut the time it takes to adapt to new information, providing a strategic edge against competitors. Once your forecasts are created, they can also be automatically updated with real-time data as it becomes available.
Efficiency Through Automation
We’ve already mentioned doing more with less. And when it comes to improving efficiency, nothing beats automation. Which is why it’s a key feature of Trovata, streamlining data aggregation, tagging, reporting, and forecasting.
This reduces the time and effort required for these tasks, and reduces the risk of human error in the process. So not only does it free up time to allow CFOs to focus on strategic decision-making, they can do it with data they know they can rely on.
Maximize Yield with Built-in Investments
Efficiency isn’t just about reducing costs. For Treasurers and CFOs, another lever to pull is finding ways to increase yield on cash reserves.
Trovata offers built-in investment options through JPMorgan, enabling CFOs to easily allocate cash to higher yielding accounts. It makes the process quick and simple, which is low hanging fruit for helping improve the bottom line during times of uncertainty.
Seamlessly Scale Data Integration as Your Organization Grows
Finally, risk management means also having systems in place that can cope with growth. As your organization expands, so does your data. Trovata’s cloud-native infrastructure ensures limitless data storage and seamless scalability. This means you can easily integrate new entities into the system without worrying about data overload or integration issues.
How Trovata Can Help Your Company Navigate Uncertainty
Trovata offers CFOs the efficiency gains and competitive advantages that digital transformation promises, without the massive upfront investment and lengthy payback period that comes with traditional solutions.
From day 1, CFOs and Treasurers can gain access to a single source of truth for all of their banking data, in real-time, aggregated and normalized automatically, and available with 100% accuracy.
With a foundation of simply better data, Trovata also provides a suite of sophisticated analysis and financial forecasting tools, moving finance and treasury teams away from finding out the what of their current situation, to focus on why changes are happening and how to navigate forward.
All of this functionality can be integrated into your existing tech stack, with the ability to connect to existing ERPs, TMSs and more. If you’d like to learn more about how Trovata can help your company navigate economic uncertainty, download our platform data sheet today.
