Beyond heavy cuts to marketing and real estate, Gartner’s data revealed broad and significant cuts of 5% or more already this year to functional budgets including: HR, Finance, Sales, R&D, IT, Communications and Supply Chain. In addition, CFOs are projecting more cost cuts this year of 5% or more to HR, Sales, Supply Chain, Finance, IT and Communications in the remainder of the year.
“CFOs are not yet sure when they will need as many staff recruiting, selling, implementing IT projects, or supporting transaction processing. This is putting budget pressure on HR, Sales, IT, and Finance in the near-term,” said Mr. Bant. “As CFOs look out to 2021, they do forecast normalization in revenues for many industries. However, most CFOs have told us that COVID-19 has illuminated new (more efficient) ways of working, and they will use this as an opportunity to right-size spend in SG&A functions for 2021.”
2021 Spending Plans: Real Estate Hit Hardest, IT and Sales See Growth
While all SG&A categories are expected to see reduced spending for 2020, 2021 shows a more bifurcated picture. As mentioned, Real Estate will see the largest reduction in 2021 (3.6%), with Marketing expecting a 1.8% reduction and Procurement, Legal, HR and Finance range between 1.6% and .6% reduction in 2021 spending. However, there are two costs where CFOs expect to increase spend in 2021: IT and Sales. CFOs are expected to increase spending in IT by .8% and sales by 1.6% in their 2021 budgets.
“CFOs are no longer expecting a long contractionary period with multiple quarters of consistent declining revenues,” said Mr. Bant. “There will be some costs that continue to remain at bay in 2021. Expanding IT and sales budgets, however, means that CFOs are investing for the next phase of growth. We see technology investments enabling remote work, new ways to reach customers, and enhanced efficiency. Sales budget growth indicates that expected revenues will start to recover, and CFOs will need to add headcount to support net-new business in 2021.”
Gartner clients can read more in Mid-May 2020 CFO Poll: Shallow Cuts Continue, but SG&A to Partially Bounce Back in 2021.
Non clients can read more here and find a selection of coronavirus-related resources here.
*About Gartner CFO Cohorts
In response to urgent CFO demand, Gartner Finance is holding regular CFO cohorts as a forum for CFOs to discuss emerging COVID-19-related areas of concern and what actions they are taking or not taking. The findings in this release are from a poll of CFOs and their direct reports leading up to the second cohort, hosted from May 14th – 28th, which included 103 CFOs.
About the Gartner Finance Practice
The Gartner Finance practice helps senior finance executives meet their top priorities. Gartner offers a unique breadth and depth of content to support clients’ individual success and deliver on key initiatives that cut across finance functions to drive business impact. Learn more at https://www.gartner.com/en/finance/finance-leaders.