CFOs focus on growth, investment as economy rebounds: Survey

Australia’s chief financial officers have delivered an upbeat assessment of the prospects for business in 2011, with an overwhelming majority saying growth is their major focus and 21% expecting “significant” improvements in operating cashflow.

The survey of 63 top flight CFOs by accounting firm Deloitte also contains some good news for entrepreneurs who sell business-to-business, with 61% of CFOs tipping an increase in capital expenditure in 2011 as growth accelerates.

Stephen Gustafson, a partner from Deloitte’s assurance and advisory division, says the survey was positive on a number of fronts, with just over three quarters expecting revenue to rise in 2011, 61% expecting a boost in operating cashflow and 50% tipping an increase in hiring.

However, Gustafson says the strong predictions of increase capital expenditure suggest confidence among businesses has stabalised.

“I think what we’ve seen is over the last few years that it’s easy for confidence to take a dent. That’s what we put a lot of stock on seeing two quarters of confidence stabilising.”

“Cap ex is a key indicator and to see the strong support for that is a really good indicator for the medium-term.”

As the GFC and credit crisis fades from view, CFOs are even become more comfortable with the idea of borrowings – 52% said they would increase their bank borrowings in the next 12 months.

“I think we’ve come out of a period of time where a greater degree of caution was built into the mindset of the CFO, and we are starting to see a little bit of relaxation around concerns about taking financial risk onto the balance sheet,” Gustafson says.

While SMEs should expect big companies to start trying to wean themselves of discounting in the coming months – 46% of CFOs said they expect to see an improvement in operating margins, against 27% tipping a decrease – there is still a level of caution around costs.

Just over 30% of CFOs planned to increase discretionary spending, while 37% expect to cut it – the relentless drive from cost-control isn’t over yet.

The survey also suggests many CFOs had reset their long-term outlook for the Australian dollar. While 52% said the stronger Australian dollar had negatively impacted their company, more than 80% said the stronger dollar would not alter their plans to grow or invest in Australia or overseas.

Gustafson says that could suggest CFOs do not expect the dollar to fall any time soon, or it could show they have adapted their business to the dollar’s new level, through mechanisms such as hedging.

“One way or another, business always adjusts to the environment it faces and I think that’s the case with the Australian dollar.”

One question the survey cannot answer is how Australia’s recent string of natural disasters might impact the confidence of CFOs – the majority of respondents completed the Deloitte survey before the full impact of floods in Queensland and parts of Victoria were known.

However, Gustafson expects Australian CFOs will look past this issue as a temporary problem.

“Some of these things can happen – last year’s sovereign debt crisis is a good example of that – and Australia continues to roll on.”