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For Your Business Grace Noto February 8, 2023

How CFOs can cut costs using data

Businesses facing insistent cost pressures are turning to their CFOs to steer them through a highly inflationary environment, with many companies — notably, those in the technology industry — hunting for “wartime” finance chiefs with the skills and experience needed to steer them through a looming recession.

CFOs must ensure they are being proactive, rather than reactive, as they prepare for a coming downturn, however — cutting costs is an important step, but finance chiefs must also make room for growth and protect spend where it is necessary, said Ed Tang, newly-minted CFO of artificial intelligence software provider BigPanda. 

“It's one thing to say, hey, we're going to cut a bunch of costs and get profitable, but it's another thing to say hey, with the resources that we have remaining, how do we not stunt growth?” Tang said in an interview.

Tang took the CFO seat for the software company — which provides an AI for IT operations or “AIOPs” platform that helps companies order and parse their IT data for greater insight — in late January. A veteran of the software industry, Tang served as CFO for anti-fraud and security company Pindrop and has also held CFO and executive finance roles at companies including Lever, Box and Salesforce, according to his LinkedIn profile.  

Balancing cost-cutting, spending

Reducing expenses is important for finance chiefs as they face a potential recession, but finance leaders must be strategic about where they are cutting costs and where they are not — prioritizing one’s value proposition to their customers is critical, for example, Tang said.

“Great customers are always challenging companies to innovate, to add to their product roadmap, and so continuing to invest in product R&D…are usually the costs that I try to protect,” he said.

It is also important for CFOs to increase efficiency as they look to successfully steer their companies through a murky economic environment — though the U.S. economy may not dip into recession, CFOs are still left facing rising costs, a challenging labor market, and a dip in customer spending.

Federal Reserve Chair Jerome Powell predicted Wednesday the country will avoid a downturn in 2023, but reiterated the Fed’s commitment to bringing inflation down to its 2% target, signaling further rate hikes will likely occur in future months.

Navigating through uncertain economic headwinds makes it critical for companies and their financial leaders to “make sure that we can see around corners a little bit better, and have mechanisms in place to slow down investment, slow down spend, without doing harm to the business,” Tang said.

Identifying mission-critical investments

For CFOs looking to achieve that balance between reducing cost and prioritizing spend, having access to the right data is key; “there's an expectation for data to be something that we leverage, very deeply to inform those decisions,” Tang said.

Using data effectively and putting a framework in place that can help businesses identify and evaluate “mission-critical investments,” whether for infrastructure or growth purposes, is an essential part of achieving that key balance between cost-cutting and growth, Tang said.

“How do we continue to figure out how to take what is manual today and automate it, even on a shoestring budget?” Tang said.

 

This article was written by Grace Noto from CFO Dive and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

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