We’re not even halfway into 2025, and it’s already been a wild ride. Volatility in inflation, trade policy, and the financial markets has made it a bumpy road for businesses. But how is today's macro-economic climate changing the way CFOs think? Moreover, what new frameworks are they using for decision making?
Billtrust surveyed 550 finance leaders to better understand how companies are responding to the latest trends. The research reveals how financial strategies are evolving to help companies better withstand economic challenges. While it’s no surprise that conservative outlooks are growing more prevalent, the data reveals intriguing insights into what CFOs aren’t willing to change – even in today’s season of financial prudence.
Below is a quick summary of the findings, but don’t miss the full research report.
Conservative Cash Management: How CFOs are Playing It Safer
One of the standout strategy shifts found in the study is conservative cash management. 63% of decision makers have shifted to this approach. And it makes sense given that 71% of finance leaders have an unfavorable outlook on economic growth, according to a recent Gartner poll as published by CFO Dive.
63% of financial leaders are taking a conservative approach to cash management
Imagine inserting more caution into your spending and saving habits. That's what many decision-makers are doing with their cash. They're making calculated moves to take on less risk as a means to protect capital. Preserving cash availability is considered a best practice because liquidity acts as a safeguard against economic volatility. Should unexpected changes hit – think dips in market demand, supply chain disruptions, currency fluctuations, or tax increases – cash surpluses serve as a security blanket.
The data shows 60% are reducing discretionary spending and capital investments, but there’s another equally important tactic. 59% are actively strengthening their financial positions through cash reserves.
This insinuates that CFOs are using all the tools in their cash management toolbox – not just cost cutting but watching their cash flow and optimizing their accounts receivable practices. Tighter management and AR automation tools aid in accelerating the process of turning a sales transaction into a cash deposit. Billtrust’s clients, for example, decrease their Days Sales Outstanding (DSO) metrics by up to 50% and increase cash flow by up to 25%.
+59% are reducing expenses and strengthening cash flow
Financial Impact: 83% Affected by Tariffs, 55% Will Hike their Prices
Shifting trade policies are among the biggest catalysts for change. Tariffs are the reason 83% report moderate to significant cost increases in their business over the past 6 months. 65% of all respondents said they’ve had to implement at least one tariff mitigation strategy. Here’s how they’re rolling out changes to alleviate the risks:
- 55% are making price adjustments that will affect customers
- 40% are rebuilding supplier networks
- 34% are transforming inventory approaches
- 30% are reconfiguring manufacturing footprints
What strikes me most about this data is the broad-scale transformation taking place. Redefined financial strategies are only a fragment of the bigger picture.
65% are implementing tariff mitigation strategies
What Turbulence? Big Bet son AI Technology are Unshakable
From revising financial forecasts and strategies to adjusting pricing structures and supporting manufacturing transformations, CFOs are leading massive amounts of change today.
But one thing remains constant: Their investment in AI.
Despite economic headwinds, Billtrust’s data reveals that AI automation is the one area where companies aren’t reconsidering or dialing back – they’re taking the plunge. CFOs are dedicating substantial portions of their budgets to these technologies, using AI for everything from forecasting to risk analysis. Amid today’s economic backdrop, 67% are dedicating over 10% of their 2025 budget AI. More remarkably, 18% are going all-in, committing more than 25% of their budget to AI.
67% are dedicating 10% of their budget to AI, while 18% are committing 25% of their budget to AI.
But even shiny, new AI tools alone can’t promise a sparkling financial future.
The Winning Formula: Balancing Defense and Offense
What emerges from our data analysis is a clearer picture of what it takes to succeed in 2025's complex environment. Top-performing responders show us their secret: It’s all about balance. The solution is a mixed portfolio of defensive and offensive financial moves.
For example, finance organizations should not just reduce expenditure but also selectively protect their cash flow and strategic investments. Top performers are also diversifying revenue streams and pursuing strategic acquisitions while enhancing operational efficiency through tech innovations.
Want five more actions the most successful leaders are doing in 2025? Get the full report.
Wrapping It Up
So, there you have it – a snapshot of tips to navigate the economic headwinds of 2025. It's a mix of caution and innovation, with a heavy dose of strategic vigilance. While the economic landscape may be unpredictable, these leaders are proving that with the right pivot in strategy, it's possible to not just survive but thrive in what could become one of the most challenging years yet. Swift action is needed. If we learn from our own history and use the 2008 recession as an example, impacts were felt for 18 months with effects on the economy lasting much longer. Moreover, credit and collections losses of 250% weren’t uncommon. Delays today could fail to deflect the impact, leaving many companies more vulnerable to impending downturns.
FAQ
CFOs are adopting conservative cash management strategies to ensure liquidity. This includes preserving cash availability, reducing discretionary spending, and optimizing working capital. They are also focusing on improving cash flow forecasting and implementing automation tools to streamline accounts receivable processes, thereby reducing Days Sales Outstanding (DSO).
Tariffs have led to moderate to significant cost increases for businesses, affecting their profitability. Companies are implementing various mitigation strategies, such as diversifying supplier networks, adjusting inventory approaches, and renegotiating contracts. Some businesses are also exploring alternative markets to reduce dependency on tariff-affected regions.
AI automation is seen as a crucial tool for forecasting, risk analysis, and improving operational efficiency. Despite economic uncertainties, companies recognize the long-term benefits of AI in enhancing decision-making frameworks, optimizing resource allocation, and driving innovation. Investments in AI can lead to cost savings, increased productivity, and better customer experiences.
A balanced approach of defensive and offensive financial moves is key to success. Defensive strategies include preserving cash reserves, reducing costs, and improving operational efficiency. Offensive strategies involve strategic acquisitions, investing in technology, and exploring new revenue streams. CFOs must continuously evaluate and adjust their strategies to respond to changing economic conditions and capitalize on growth opportunities.