Cash & Liquidity ManagementCash ManagementUS CFOs Upbeat on Prospects for 2013

US CFOs Upbeat on Prospects for 2013

Middle-market and corporate chief financial officers (CFOs) in the US are optimistic for macroeconomic and business growth at a level unseen since the height of the Great Recession, according to a survey conducted by TD Bank.

The survey, conducted by the bank in November and December 2012 by ORC International, polled 303 executives. Forty-six per cent of CFOs polled said they are more optimistic about US economic growth over the next year compared to 2012, while 57% of respondents are more optimistic for their own companies’ performance over the next year.

The survey found that most middle-market and corporate financial decision-makers report their companies have accumulated at least a modest stockpile of cash and are optimistic for revenue increases in 2013. In tandem with expectations for increased cash flow and a positive business outlook, 48% of all executives polled expect their capital expenditures to increase over the next 12 months.

“Business executives have grown more willing to invest, albeit cautiously, over the last year and our survey results support this trend continuing through 2013,” said Greg Braca, head of corporate and specialty banking at TD Bank. “Despite remaining policy and regulatory concerns at the macro level, CFOs seem poised to drive expansion and investment with capital accumulated since the downturn.”

Cash Reserves Drive Reinvestment

Noting that the increase in corporate cash reserves has been much discussed in recent years, TD Bank says the survey results support that trend, with 66% of respondents stating they have at least a modest stockpile of corporate cash saved. Of those accumulating reserves, 26% report they are prepared to spend from those funds in 2013.

Adding to the optimism regarding cash availability, over the next year 71% of CFOs expect sales to increase, with only 15% expecting a decrease in sales. While those expecting a drop in sales increased by six percentage points from last year, 13% anticipate no change.

Responses regarding cash flow may correlate with increased willingness to spend. A majority (54%) of surveyed executives plan to increase capital expenditures in technology. Other top areas of expected capital deployment include:

  • Improvements to existing facilities (34%).
  • Hiring (26%).
  • Construction of new facilities (24%).
  • Office equipment (20%).
  • Expansion via merger/acquisition (18%).

Notably, 24% of respondents from companies with revenues over US$500 responded they may likely use cash reserves for expansion via merger and acquisition.

“The climb to a sustained corporate recovery has been a long one, but our survey results and recent work with customers indicate the environment is progressing,” said Fred Graziano, head of regional commercial, government and small business banking, and US treasury management services, at TD Bank. “The cautious optimism hinted at in last year’s survey has begun to take hold within our footprint, and we’re seeing customers capitalise on the low interest rates through merger and acquisition (M&A) and self-investment, positioning themselves for a recovery in the market.”

The Challenges of a Being a CFO

Although more optimistic, finance executives continue to be affected by the unstable US economy and the duties of their position. In reporting the most challenging aspect of the job as a financial decision-maker, 25% cited the ability to forecast results, with managing and training staff (16%) and acting as a strategic advisor to their chief executive officer (CEO) (14%) as other significant challenges.

Aside from the US economic climate, about which executives are largely optimistic, respondents are concerned about the government’s potentially negative impact on their company finances. Thirty per cent of those polled cited political gridlock over the US budget deficit and tax policy, and 24% cited government regulation, as substantial sources of anxiety. While overall uncertainty regarding the global economy remains an issue for 15% of respondents, the sovereign debt crises in Europe are less of a concern, cited by only 3% of those surveyed.

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