The world of corporate finance is continuously evolving. For CFOs, it is a must to keep up with the latest trends. This article elucidates three of the biggest trends in the field.
• Companies are moving from static budgets to fluid financial plans that utilise rolling forecasts, so that market fluctuations are accounted for. 71% of firms found that by updating forecasts, financial risks can be easily mitigated in 2013.
Since that year, the technique has been growing in demand and popularity because:
o It ensures changes to the course.
o It focuses on events taking place in the real world.
o It gives the freedom to capture market opportunities.
By the time 2017 came around, CFOs had made rolling forecast a priority. While in 2014 only 25% of companies had attained financial agility, in 2017 the number was up to 38%. Right now, it is even higher, and it is thanks to rolling forecasts.
• From Heinz to Boston Scientific, Zero-Based Budgeting is being conducted by the top organisations of the world. ZBB is a technique where every expense of the company has to be justified in a budgeting period. The expense has to prove demonstrable need. While the concept is almost 50 years old, it has gained traction lately to attain corporate leanness.
• Both rolling forecasts and ZBB are old ideas which have seen a resurgence, but the one corporate trend that is brand new is Artificial intelligence. The prominent CFOs of the world are now utilising AI to take care of tedious tasks such as compliance and audits. Manual jobs that need to be performed repetitively are being done by machines and AI rather than human employees.
As the year ends, the majority of firms will be capitalising on these corporate finance trends.