Middle-Market CFOs Tag Competitive Positioning Among Top Drivers of Uncertainty

• Uncertainty costs have increased to 17% of revenue for high-volatility firms.
• 80% of firms with most financial operations automated report low uncertainty levels; just 11% of those using less automation report the same.
• Two in three middle-market CFOs expect uncertainty to improve within a year.

For middle-market chief financial officers (CFOs), cash forecasting and competitive pricing are primary concerns related to uncertainty. PYMNTS Intelligence data finds that business performance had 27% of them worried in May, and key drivers for that worry include cash forecasting and cost control. Competitive position also continues to concern 25% of CFOs, with pricing a significant factor.

Why are these top of mind? For some middle-market CFOs, early-year projections may not be coming to fruition. January’s cash forecasts may start to seem overly optimistic relative to reality, intensifying concerns about competitive pricing and positioning.

As our research has found, uncertainty has real costs for middle-market businesses. Firms deemed by our research to be high-volatility businesses report increased uncertainty costs — now 17% of revenue, up from 7.1% in February. Firms operating in more predictable conditions maintain lower uncertainty costs, with percentages in the single digits.

Middle-market CFOs have made it clear that automation significantly boosts certainty for their firms. Four in five middle-market firms with most of their financial operations automated report high certainty levels. Just 11% of their counterparts with less than 25% of financial operations automated have the same sense of certainty. Automation and effective process improvements play a key role in managing uncertainty. By prioritizing these strategies, CFOs can enhance business stability and growth.

These are just some of the findings detailed in “Middle-Market CFOs Tag Competitive Positioning Among Top Drivers of Uncertainty,” the fifth edition of the PYMNTS Intelligence 2024 Certainty Project. This monthly project rotates through insights from CFOs, heads of payment and heads of product. It monitors trends in the operations of U.S. firms with revenues between $100 million and $1 billion in 2023. This edition examines how middle-market CFOs have automated processes to mitigate uncertainty’s impact on financial operations. It draws on insights from a survey of 60 heads of product from middle-market companies. The survey was held from May 6 to May 10.

• Factors at the Forefront for CFOs
• The Increasing Costs of Uncertainty
• Workflow Improvements Increase Certainty Levels
• Automation’s Impact on Uncertainty
• Conclusion
• Methodology

Factors at the Forefront for CFOs

Middle-market CFOs focus on the big picture, and 27% have identified business performance as their top source of uncertainty. Most of these executives cite cash forecasting and cost control as main drivers of business performance uncertainty. However, this also marks the third consecutive month in which competitive position has weighed heavily on CFOs’ sense of certainty.

Concerns over supply chain integrity and macroeconomic conditions highlight how larger external factors also remain on CFOs’ radars. These challenges require robust, strategic planning to mitigate uncertainty and maintain business stability. To navigate these uncertainties effectively, CFOs must focus on improving financial forecasting, cost control and pricing strategies.

The Increasing Costs of Uncertainty

Uncertainty’s estimated costs are increasing the most for middle-market firms operating with the highest levels of uncertainty. CFOs who operate with a high uncertainty level reported a total cost estimate of 17% of revenue, a significant rise from 7.1% several months ago. This sharp increase illustrates the compounding effect of unpredictable conditions on operational expenses and revenue loss.

As can happen when May rolls around, a number of CFOs face mid-year troubles. Projected deals may fall through or get delayed, and cash forecasts can prove increasingly uncertain or inaccurate. These firms’ CFOs are struggling to strengthen competitive positioning through pricing while battling rising costs, exacerbating their feelings of uncertainty.

While uncertainty levels remain stable for most firms, estimated revenue losses have increased overall. However, highly volatile firms have driven this increase in the average cost of uncertainty almost exclusively. Firms with low levels of uncertainty reported far smaller changes, with costs remaining relatively stable: 2.4% in May, compared to 1.6% in February.

These findings emphasize the need for effective uncertainty management strategies. Better predictability in operations helps control financial impacts, while firms in more volatile environments face escalating costs. Robust, strategic planning and ongoing operational adjustments are essential to reduce these rising costs and maintain business stability.

Uncertainty’s impact is down — except in key areas

Uncertainty’s impact remains significant in key areas. The share of middle-market firms experiencing errors and delays rose to 38%, for example. Similarly, the share of CFOs reporting missed opportunities jumped to 35%, and the share reporting lost revenue rose to 22%. These areas highlight how uncertainty in cash forecasting and pricing can lead to real financial impacts.

However, CFOs have gained an edge in the ongoing struggle to manage costs and maintain stability despite fluctuating market conditions. Although more CFOs report that uncertainty has diminished profits, the shares reporting customer issues and churn have recently decreased. Likewise, fewer CFOs noted uncertainty’s impact on supply issues.

Are analytics taking a back seat to other strategies?

Data shows that CFOs have been far less likely to use analytics lately, with greater emphasis placed on process improvements to mitigate uncertainty. Just 25% of CFOs reported using analytics to forecast trends and gain insights — a significant drop over the past several months. Similarly, just 17% reported that their firms incorporated process automation. This shift hints at the recent emphasis on strategies that use more immediate and tangible methods to manage uncertainty.

In May, 47% of CFOs reported introducing new processes and workflows to mitigate uncertainty. This focus on process improvements illustrates CFOs’ recent emphasis on enhancing operational efficiency and stability. While reliance on analytics and automation decreased, adopting new workflows remains a prominent strategy. This suggests that CFOs are prioritizing practical, actionable approaches to navigate uncertain conditions effectively — and recognizing the immediate benefits of streamlined processes and enhanced workflow management.

Workflow Improvements Increase Certainty Levels

CFOs are seeing positive results from the practical benefits of streamlined processes and enhanced workflow management. Data shows that process automation, data collection, new workflows and dedicating human resources effectively mitigate uncertainty.

In May, CFOs reported high effectiveness for process automation and data collection, highlighting their reliability in improving operational efficiency. New workflows achieved a 97% success rate in mitigating uncertainty. These practical, actionable approaches highlight the value CFOs place on solutions that drive operational efficiency and provide stability in uncertain conditions.

Automation’s Impact on Uncertainty

Middle-market CFOs with more thoroughly automated financial operations are almost eight times more likely to report high certainty than those with less automated operations. Specifically, 80% of middle-market companies with more than half of their financial operations automated report high levels of certainty. By contrast, only 11% of firms with less than one-quarter of their operations automated experience the same level of certainty.

Automation streamlines routine tasks, such as invoice processing, transaction management and reconciliation. This can free up finance teams to focus on higher-value, bigger-picture activities like strategic planning and analysis. This shift lets CFOs navigate volatile markets with greater certainty and control around a major source of uncertainty: cash forecasting. By integrating new technologies and automating processes, firms can significantly reduce uncertainty and improve overall business stability.

Conclusion

Many middle-market CFOs have found workflow improvements are central to mitigating uncertainty’s financial and operational impacts. Likewise, process automation makes a significant impact on uncertainty by enhancing operational efficiency and stability. Firms with highly automated financial operations report much higher levels of certainty, underscoring the value of streamlined processes and effective workflow management in navigating uncertain conditions.

Looking ahead, CFOs have increased optimism, with 65% expecting uncertainty to improve in the next 12 months. Even those CFOs currently experiencing high levels of uncertainty are optimistic, with most anticipating improvements in the next year. Despite taking fewer actions to mitigate uncertainty than earlier in the year, CFOs are focusing on more effective strategies, indicating a shift toward quality over quantity. This trend suggests that middle-market CFOs are becoming more strategic and targeted in navigating and reducing uncertainty, positioning their firms for greater stability and growth in the coming year.

Methodology

“The 2024 Certainty Project: Middle-Market CFOs Tag Competitive Positioning Among Top Drivers of Uncertainty” is the fifth edition of the PYMNTS Intelligence Certainty Project. This monthly project monitors trends across operational areas of companies with $100 million to $1 billion in revenue last year. Each month, the project rotates through CFOs, heads of payment and heads of product to capture uncertainty’s sources and costs. The series also captures the strategies that executives use to deal with complex and dynamic business environments.

This issue explores the strategies that 60 surveyed CFOs use to keep their company’s financial operations on track in a volatile environment. Ninety-seven percent of the businesses have operated for 10 years or more, with 7% operating between five and 10 years. The survey was held from May 6 to May 10.

For more, read the May 2024 report, “Middle-Market Heads of Product Battle Uncertainty with New Processes and Partnerships.”