How CFOs are Planning for 2021

December 14, 2020
Lilas Kniho

The State of the U.S. Economy and the Business Landscape

Prior to the advent of the COVID-19 pandemic, the U.S. economy was booming like never before. But the Coronavirus and the ensuing lockdowns drove a proverbial train through that, creating a demand shock, supply shock, and financial shock, wiping out a significant portion of gains made in the 113 straight months of job growth and 128 months of economic expansion.  

Despite the uncertainty surrounding COVID, there’s a light at the end of the tunnel. Per the CDC, hospitalization and mortality rates have dropped precipitously as treatment and therapeutics have improved, and a viable vaccine is expected to be approved for public consumption by year’s end.

As we head into Q4, there appears to be a consensus of cautious optimism among CFOs that the country is in the midst of a V-shaped recovery. CFOs are confident in their ability to operate safely, effectively, and profitably as the economy continues to open back up.

Although the majority of CFOs don’t expect companies to reach pre-pandemic levels of operation until Q1 of 2021 or later, they are currently preparing and positioning their companies for the unique challenges ahead.

On the road toward full economic recovery, we’ll cover what top CFOs are expecting and how they are planning in response:

  • Outlook on economic recovery
  • CFOs’ primary focus is on cash and liquidity
  • Immediate COVID cost management actions
  • Plans for returning to normal operations
  • Strategic actions
  • How CFOs are budgeting for 2021

Key CFO Surveys

We’ll draw from five key sources that surveyed top CFOs throughout 2020.

  1. Gartner CFO Survey – 317 CFOs and Finance leaders taken at the end of March.
  2. Hanover Research COVID-19 Sentiment and Reactions – 212 respondents who are either CFO, VP, Director, or Controller of finance.
  3. Deloitte CFO Signals – Polls top CFOs from America, Mexico, and Canada.
  4. McKinsey’s Memo to the CFO  – Surveys 127 CFOs from March of 2020 to August of 2020.
  5. McKinsey’s Economic Conditions Snapshot, September 2020 – A global survey of more than 1000 executives and business leaders.

The bracketed numbers below will correspond to these sources.

Outlook on Economic Recovery

Nearly every surveyed CFO and executive has stated that their company experienced financial challenges due to the pandemic. But the perceptions of where the economy is today are mixed. Assessments of current conditions have improved compared to recent months, although the degree to which it has improved varies:

  • Perceptions of the U.S. economy – 60% of CFOs rate the current North American economy as poor, but YOY growth expectations have rebounded significantly from previous quarters. 74% of CFOs expect to meet their original 2020 revenue.
  • Perceptions of markets and risk – 84% of CFOs say the equity market is overvalued, 87% find debt financing attractive due to low interest rates, and 41% (a 14-point increase from Q2 responses) say that now is a good time to be taking greater financial risks.
  • Sentiment (own company) – Own-company optimism has increased significantly. Net optimism in the U.S. rose drastically from -54 to +42 thanks to promising economic numbers (unemployment, GDP, decreasing mortality and hospitalization rates, etc.) that exceeded earlier dour forecasts.
  • Future expectations – Respondents have much higher expectations for the future. Instead of falling into a deep recession, as many had predicted, more than half of respondents say economic conditions in the U.S. economy will be better six months from now.

And while industries differ greatly, many CFOs’ plans going forward involve a mixture of survival, adaptation, and evolution in their business practices in lieu of a massive post-crisis behavioral shift.

Unsurprisingly, the most common fear for CFOs is new waves of COVID-19.

When asked, the top business concerns related to COVID-19 have been around:

  • 29% said macroeconomic concerns
  • 23% said revenue loss and lowered demand
  • 9% said employees
  • 4% said cash
  • 23% said other issues

Although the majority of CFOs have a positive future outlook, many appear to be tempering expectations and preparing for potential market shocks.

CFOs’ Primary Focus is on Cash and Liquidity

Only 40% of CFOs report cash levels that are more than 10% higher than their pre-pandemic levels. An average of 25% of businesses reported having more cash than pre-pandemic levels, with services and retail industries being the most likely, and technology and energy being the least likely.

66% of CFOs say they have raised or accessed additional cash. Their primary reasons for this varied:

  • 53% said it was to help them navigate uncertainty
  • 16% said it was to help fund ongoing operations
  • 13% said it was to acquire new companies or assets
  • 13% said it was for pre-pandemic planned projects
  • 5% said it was to pay down, retire, or refinance debt

As CFOs prepare for the near future, more than half of them said that their most important role during the crisis—and moving forward—has been managing cash and liquidity. Many mentioned that this has also forced them to focus on refinancing the business or managing their relationships with lenders and investors.

About 45% cited planning and analysis roles as their key function going forward, especially around forecasting and modeling the potential impacts of COVID on the business. From there, they seek to establish plans and targets for the immediate future.

Immediate COVID Cost Management Actions

In response to the crisis, one of the most aggressive actions taken by CFOs has been to aggressively rein in costs.

For the first time in a decade of Deloitte's CFO Signals Surveys, companies have shifted their focus toward cost reduction instead of revenue growth (43% versus 32%). Per McKinsey, “43 percent of the 127 CFO respondents we recently surveyed cite the need to streamline their overall budgeting processes to react more quickly and efficiently. Meanwhile, 65 percent anticipate more use of rolling forecasts in 2021 and beyond". Streamlining these processes can be as simple as incorporating automated accounting workflows and automated expense management into the company.

Additionally, CFOs tightened focus on their current offerings rather than introducing new ones (47% versus 31%).

One deeply felt cost-cutting solution? Reduced hiring. 57% of companies reduced their hiring due to pandemic-related financial challenges, 41% reduced their temporary or contract staff, and 34% of have implemented layoffs or furloughs.

But hiring hasn’t been the only place where businesses have sought to cut cost. Marketing budgets have been slashed by 14% on average against 2020 plans, with an additional 11% of expected cutbacks [1]. This would account for a 25% spend reduction on the year. Besides that, the greatest areas for cost cutting have been:

  • 5% said it was to pay down, retire, or refinance debt
  • -8% of real estate
  • -7% of sales budget
  • -7% of HR
  • -6% of finance

In all likelihood, budgets will continue to tighten until the recovery is in full swing.

Plans for Returning to Normal Operations

By the end of the year, approximately half of all the companies surveyed are expecting to return to normal operations.

Currently, 25% of CFOs say their company is already at or above its pre-crisis operating level, and another 19% say they expect to be there by 2021 [3]. The companies that are most likely to return to normal- or high-operating levels by year’s end include technology, energy/resources, and healthcare/pharma.

But many are holding onto funds or keeping business in stasis until the conclusion of the presidential election. 61% of companies are either somewhat likely (37%) or extremely likely (24%) to defer investment and other key financial decisions until after the presidential elections, with the largest deferments being:

  • 44% said hiring and staff
  • 43% said launching new services
  • 36% said facilities expansion
  • 33% said global market expansion
  • 31% said acquisitions

Once the dust has settled and a winner emerges, companies will have a better gauge on the country’s future economic policies. The possibility of a potential 7% corporate tax rate hike and a minimum 15% tax on all companies have some CFOs pushing pause on potential expenditures or course corrections until they know which way the political winds are blowing.

Strategic Actions

In response to the crisis, CFO’s have had to make strategic shifts throughout the entirety of their organization.

Few actions were as significant as the decision to shift toward more and longer-term remote work. Along the way, they learned something new—thanks to modern technology, businesses affairs could be handled remotely with no noticeable impact on workflows

As a result, approximately 74% of companies plan to permanently shift to more remote work post COVID-19 [1]. The first place this has and will continue to occur is within customer sales and customer service.

Such a decision is one of the more creative ways CFOs are attempting to avoid larger cuts and reductions in operation. According to Alexander Bant, VP of Gartner:

"Most CFOs recognize that technology and society has evolved to make remote work more viable for a wider variety of positions than ever before. Within the finance function itself, 90% of CFOs previously reported to us that they expect minimal disruptions to their accounting close process, with almost all activities able to be executed off-site."

As companies continue to struggle with business disruptions and market shocks caused by COVID, the shift to remote work may become a permanent fixture of the business landscape. This is backed up by the fact that many businesses have already made cost reductions in real estate expenses by either downsizing their office, or ditching it all together.

In addition to this, other strategic changes have included an acceleration of business digitization, and a higher focus on costs and productivity.

How CFOs are Budgeting for 2021

As 2021 approaches, CFOs realize that they need real budgets that combine current resources with COVID strategy. Put simply, “the business-as-usual budgeting process, with its traditional inputs and standard approaches, is no longer fit for the task".

Budgeting perfectly—especially now—is impossible, but you can certainly create a process that is more geared toward our current climate. This revamped budgeting process follows four key steps:

  1. Stress-test scenarios and assumptions to counter uncertainty.
  2. Reimagine the business from a zero base to determine key business drivers.
  3. Hold back some spending centrally to build flexibility and optionality into budgets.
  4. Assign finance talent to the highest-priority areas or topics to prevent burnout.

Stress-Test Scenarios and Assumptions

The first task ahead of your team is to see how your 2019 budget scenarios, assumptions and decisions stacked up to what actually played out this year.

Did any of the test scenarios that were projected end up materializing? How did initiatives enacted during the crisis impact company performance?

It’s critical that all teams—whether sales, marketing, or finance—perform independent stress tests and strategic plans. This can help you determine which steps the business can take in pursuit of financial success.

Consider Building the Budget from a Zero Base

COVID has forced many businesses to utilize a zero-based budgeting principle in order to justify their spend and ensure business continuity.  

Businesses have needed to be agile, able to shift spending on a dime, allocating large portions of a budget in order to keep the business afloat. A happy realization from this tumultuous year was that areas of the budget that had once been permanent, weren’t as critical as they might have seemed.  

Starting in 2021, there may be several places where you are starting from a zero budget already.

For instance, you may not plan on spending any money on travel or office in the coming year. By performing rigorous reviews over key spending areas, you may be able to identify key business drivers while also finding other areas where the budget’s base can be reset to zero.

Reserve Some Spending as Contingent Resources

With all the uncertainty going forward, it’s important that you have reserves that are built into the budget. This gives flexibility and optionality, should further disaster strike.

In a normal year your budget is mostly fixed. But for now, you need to build a budget with greater agility so you can shift resources as needed. Also known as a modular approach, this increases your survivability by adding options and contingencies into the budget and creating centrally controlled fund pools.  

When applying this budgeting method, each project must be broken up into phases. At each step, the phase must be reviewed and decided to be given further funding. If those funds could be better utilized elsewhere, the project is put on the backburner.

Put Finance Teams on the Highest-Priority Areas While Embracing Technology

Few aspects of business life have been forced to adapt as rapidly to the COVID pandemic as finance teams. They have had to make significant budgeting and planning decisions, all the while dealing with shorter reporting cycles and a decentralized work environment.

Unless they receive support, burnout is a very real possibility.

Digital tools and automation can help alleviate some of the pressure. When supported by financial software, you allow them to focus on high-priority areas. This prevents them from wasting time on frustrating, manual-based processes.  

By embracing technology, you can not only reduce the time constraints on burdensome, inaccurate processes like expense reconciliation, but also make them more accurate and cost efficient as a byproduct.

Ramp: Helping You Prepare for Q4 and Beyond

As we dive further into fall, there’s reason to be cautiously optimistic about your financial prospects. The vast majority of CFOs are gearing up for Q4 with reservations but a positive outlook on the end of the year and the beginning of the new one.

So, how are you preparing for Q4 and beyond? Are you taking control of your spending?

Ramp can help with that. We’re a corporate card that helps CFOs gain greater control and visibility over their company spend. Whether it’s the 1.5% cash back on every purchase or the built-in automated expense management, Ramp is geared to help you succeed.


Brookings. Ten Facts about COVID-19 and the U.S. Economy.

Center on Budget and Policy. Tracking the Post-Great Recession Economy.

CDC. Provisional Death Counts for Coronavirus Disease 2019.

NYT. Coronavirus Vaccine Tracker.

WSJ. Most CFOs Expect Return to Pre-Crisis Operating Levels by Mid-2021.

Gartner. Gartner CFO Response to COVID-19.

Hannover. Hanover Research COVID-19 Sentiment and Reactions.

Deloitte. Deloitte CFO Signals.

McKinsey. Memo to the CFO: A new approach to 2021 budgeting starts now.

McKinsey. Economic Conditions Snapshot, September 2020.

Kiplinger. Election 2020. Joe Biden's Tax Plans.

Gartner. Gartner CFO Survey Reveals 74% Intend to Shift Some Employees to Remote Work Permanently.

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