Written by Søren Westh Lonning, CFO, Pleo
Businesses will be encouraged to hear the UK is set for faster growth in 2025. But this forecast comes with an important set of caveats — ones that include higher inflation and the looming continuation of geopolitical issues that threaten to disrupt forecasting and market stability.
For many businesses, the UK's growth is a promising indicator of their own. But the current uncertainty associated with 2025 means that every decision is, at least in part, a gamble. And CFOs and finance leaders are under immense pressure as they try to navigate an unpredictable year.
What's more, the margin of error for finance leaders is narrower than ever. Pleo's Finance and Business Synergy Report found that despite business ambitions increasing, investment hasn't. More than a third have had budgets reduced and only 22% have seen an increase.
If businesses want to turbocharge growth this year, they need to find a way to relieve the pressure on their finance teams and empower them to identify safe bets in a world of increasingly higher stakes.
Managing uncertainty is a catalyst for growth
Without the appropriate level of visibility into their cash flow and finance, finance teams risk making the wrong spending decisions — and worse still, the wrong cuts. For instance, as many as 47% of UK businesses say they regret making drastic cost cuts in the past 12 months; cuts that pull on the wrong levers and make growth even harder to achieve.
To correct this, finance teams must find a way to predict and manage uncertainties accurately. In lieu of a DeLorean, finance teams can do this by building synergy across departments, processes, and resources, driving up their visibility, and leaving as little to chance as possible.
Here are several strategies the finance function can implement to create more certainty amid uncertainty:
1. Do more, better, with data
By looking back at past data, businesses have a unique opportunity to predict the future. But for this to work though, leaders shouldn't hoard it. Instead, they should conceive of their data as a product. For example, if they are budgeting for the year ahead then a problem they'll encounter is how they forecast; a common enough financial challenge, but one marred in uncertainty. However, historical data analysis, circumstantial trends, and predictive analytics can help cut the level of risk associated with over- and under-budgeting and spending.
AI is pivotal to this practice of course. But finance teams have their own role to play too, and this is an opportunity for them to evolve their AI skill set — namely, prompt engineering. Much like interactions between humans, asking the right questions results in the right outputs. And giving AI the right prompts can help teams effectively tap into the data they need to revolutionize financial processes and enable faster, more accurate insights.
2. Prioritize effective collaboration
How teams collaborate daily has a profound impact on their level of visibility and synergy. As many as 60% of UK organizations named a lack of communication, understanding of needs, and in-house collaboration as the reason behind bad spending decisions, with 67% subsequently making in-house collaboration a strategic priority for this year.
Collaboration might sound woolly to some leaders; perhaps lacking the clout of harder skills like data analytics and budgeting. But leaders do not have to choose between them as collaboration and transparency will ultimately feed into the same visibility and clarity. With 76% of UK businesses saying better in-house collaboration can make them a more financially successful company, there's value in breaking siloes.
3. Evolve the treasury function
Finance teams might not be able to predict the future but they can have a say in the future of their functions. When it comes to maintaining control and leaving little to chance, the secret weapon for businesses is their treasury function. But many companies aren't using theirs to its full potential. This critical oversight of cash flow and finance is bogged down in manual tasks, leading to more errors and a drop in financial agility.
Even if leaders think their treasury function is effective and future-ready, they should spend time auditing its activities and assessing how confident their teams are ahead of a challenging year. Tasks such as analyzing cash flow across multiple entities and managing various subscriptions involve hours of manual work per week; time that is better spent analyzing spend patterns and making excess cash work harder. Finance is in the process of a long overdue digital transformation, and leaders should ensure their treasury function isn't left in the past.
Building certainty in an uncertain world
As much as businesses might want them to, CFOs and finance leaders will never be able to predict the future. But by focusing on their past data, their present collaboration, and their future functions, they can effectively manage uncertainties through a combination of synergy, technology, and strategy. This is how businesses can turbocharge growth and make their own certainties in an uncertain world.
Download Pleo's Finance and Business Synergy Report.
This post was created by Pleo with Insider Studios.
