Despite the credit crunch, the number one company priority for many chief
financial officers and senior financial executives is revenue enhancement, new
research has found.
Many of Europe’s finance heads believe there is still capacity to expand
their companies and increase revenue in the coming year.
The What’s keeping you awake at night? survey by restructuring advisory firm
found 74% of respondents said revenue enhancement was a top three priority when
asked what they were focusing on most to compensate for tight credit markets.
Controlling fixed costs ranked second while screwing down on variable costs
ranked fourth, after improving the balance sheet.
Sixty-three per cent of respondents said their companies expect
“good-to-strong” growth in 2008, while 37% expect their credit outlook in Europe
to be “somewhat better” in the latter half of this year despite worsening
More than one-third of CFOs believed that higher revenues could be achieved
through value engineering, such as enhancing products to maintain margins and
increasing sales volumes, and that this was their principle strategy. However,
31% said pricing improvements would be their first choice.
As to what to do with the extra revenue, the top two funding needs for
companies this year were internal process improvements (37%) and balance sheet
improvement, (34%). In terms of balance-sheet management, the need to improve
cash and working capital far outweighed other balance sheet options, such as
debt restructuring or asset sales. Of the senior finance executives polled, 46%
said improving working capital was their main priority. None of the CFOs polled
listed debt reduction as their highest priority and less than 1% said asset
sales were important.
When asked what priority they would give to cost-cutting, 29% of respondents
believed process improvements would come top in 2008. Considering that 29% also
rated their recent major IT projects as ineffective, it would seem clear why.
David Hutchinson, managing director at AlixPartners, said CFOs and finance
executives needed to take note of various ways to generate revenue. “As the
market environment becomes tougher, CFOs are recognising that cost cutting alone
is not enough to weather the storm.”
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