Over the past year, the middle market has not seen the rebound for which many had hoped. With inflation raising the cost of doing business, New York middle-market companies largely experienced lower revenue and profitability than expected in 2023, according to the 2024 BDO Outlook Survey ( https://insights.bdo.com/2024-BDO-CFO-Outlook-Survey.html).
The survey polled 600 middle-market CFOs nationwide, including nearly 50 from New York, to uncover their top business priorities and risks. The results provide unique insights into the challenges that New York businesses are navigating.
Amidst these challenges lie opportunities for proactive measures. By making a bold move such as integrating a new technology, revamping workforce engagement strategies, or investing in ESG, New York organizations can gain market share now and position themselves for enduring success.
Cost-reduction strategies
Strategic cost optimization goes beyond addressing slowdowns in growth; it fosters long-term revenue and profitability. When looking at areas to improve efficiency and trim costs, businesses should prioritize investments that secure future success, such as revenue model refinement, technology and talent.
According to the survey, 35% of New York CFOs plan to refine their pricing strategies this year. Pricing adjustments can help bolster revenue, reduce expenses, and gain market share in the short-term, while also better positioning companies during economic uncertainty.
Another way to ultimately reduce costs is by investing in technology. Fifty percent of New York CFOs plan to increase their involvement in digital transformation endeavors. That’s because innovative technology can improve decision making, expand speed to market, strengthen customer experience and boost operational efficiency.
The workforce is also an area where CFOs are seeking to optimize costs. While considering several strategies, outsourcing or co-sourcing work is one of the most attractive with 42% of New York CFOs planning to utilize this strategy. Additionally, 31% of organizations plan to leverage automation and AI to achieve efficiency this year. When considering outsourcing, companies should identify the projects and functions with well-defined processes that require manual work but are not candidates for automation. Similarly, companies should look at areas that require specialized expertise, with roles and tasks that may be better suited for outsourcing than building the requisite skills in-house.
AI: alarm bells and opportunities
Generative AI is on the minds of nearly all middle-market CFOs, with more than 1 in 3 CFOs believing AI presents a great risk to their business. Much of the concern is fear of the unknown with 25% of New York CFOs concerned about their inability to find talent with the right skills. The road to generative AI adoption is evolving rapidly, and so are the skillsets required to use the technology to its potential. Finding talent with prompt engineering and generative AI model training and development skills, for example, will become increasingly important.
Instead of losing sleep over it, CFOs should embrace AI because the opportunities are endless. Many companies already realize the value of AI as almost 50% of U.S. organizations polled have formalized or are in the process of formalizing a policy around generative AI. In New York, that number jumped to 67%, highlighting the market’s eagerness to adopt AI.
Emphasis on social impact reporting
Aligning business and environment, social and governance (ESG) goals can catalyze innovation and long-term growth. That’s why 53% of CFOs nationwide report they are integrating ESG principles into their core business strategy or are actively working on it. In New York, we’re seeing even more of an investment in ESG programming with 57% integrating it into their core business strategy. The No. 1 reason New York companies are focusing on this is to improve their ESG rating. Businesses with high ESG scores from a credible third-party rating agency are better positioned for capital access and strategic investment partners amid rising borrowing costs and sluggish venture capital funding.
Organizations should also make sure they’re taking advantage of available sustainability incentives by engaging their finance department, as well as relevant sustainability, public affair, and tax teams.
Addressing your organization’s impact on people and the planet isn’t only ethical; it’s crucial for long-term resilience.
When challenged by daunting market conditions, companies can grow through calculated risks and decisive actions. By taking a multi-pronged approach to cost optimization and addressing aspects such as people, products, technology and infrastructure more aggressively than competitors, New York businesses have the opportunity to not only survive—but flourish—in 2024 and beyond.
Chuck Barragato is the Long Island tax practice leader and northeast regional leader for Private Client Services at BDO USA, P.C.
LIBN Staff
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