RSS feedsDespite 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 AlixPartners 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 economic forecasts.
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.”
