What Top CFOs Predict For Investors in 2014

Image by: Cydcor Offices
By Michael Sterling

It’s no secret that Chief Financial Officers (CFO) are the backbone to a thriving business. They are, after all, the brains behind the cash register. 2013 brought changes within all industries, and in the next 12 months, we’re sure to see a lot more. The recession has brought upon new changes in governmental policy – policy which will ultimately affect a company’s finances.

According to new research, CFOs are trying to maintain economic stability, so knowing where the money is going to land is crucial in preparing a strong strategy. It’s clear that 2014 is going to be one of significant changes. As an investor, this information will help you prepare for profitable returns.

Emerging Market Increase

According to data released by American Express, the number one spot in the world where CFOs want to invest corporate cash is in emerging markets. Though many CFOs are incredibly optimistic about the economy gaining momentum back, a high majority are restraining their strategy. 17% said they are likely to increase real spending and investment substantially over the next year.

“The biggest place we’ve been adding talent is developing and emerging markets. As quickly as you can fill the positions, you have new needs because the businesses are just growing that rapidly.” – PepsiCo Inc. CFO Hugh Johnston,

The rise of new inventions are creating innovative ways of planning business investments. Biotechnology, pharmaceutical companies, and the demand of online uploading has skyrocketed in the last two years. This has obviously been affecting the world’s economy.

*Tip: Keep your eyes on Brazil, Russia, China and India. Europe as a whole is in a recession and many say they will have a hard time coming out. China and India have always been on top, and predictors say they will grow at least 6% in the coming year. Be sure you put your money where it will benefit. 

Work Rotation Might Change Business Models

It is becoming more common to rotate staffers internationally in order to bring fresh ideas to a company’s international finances. Not only does this give employees exposure to new challenges, but it keeps the underbelly of each business more interesting. 2014 is going to be around the time most big companies will make a routine rotation.

“When people get different experience they’re more motivated, they get more interested in what they are doing and they also develop better perspective.” – Pamela Craig, CFO at Accenture PLC. 

PepsiCo is famous for doing this type of strategy. CFO Johnson has said that their staff is often expected to have spent some time in financial AND analysis groups so they can see all aspects of the business, after which, will make them better skilled when they go international. Mr Johnson himself has said he moved 8 times in his career.

One of the downsides is that with each rotation (usually 5 – 10 years a piece), the company’s financial plan will shift. Keep an eye out for these kind of rotations. Sometimes it will change for the better, sometimes for the worst.

Observe which country this rotation is taking place, and how local the staffers are. Business leaders in other countries want to work with local people who speak their language and who understands the country’s currency. As an investor, it’s always a great idea to understand how big companies work with each other. Make sure you have the full picture.

Tax Adjustments For All Companies

There are certain tax provisions that are going to change next year  which may restrict a company’s financial plans. It’s best to know them so you can take advantage today before the opportunity passes.

According to the Joint Committee on Taxation, 55 provisions will expire, and 24 of those are related to businesses. Most of the provisions have been extended previously, however, they most likely will not be extended this time around. Here are a few provisions you might find interesting:

  • In 2014, the straight-line cost recovery period for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements, will no longer be 15 years. Instead, they are reverting back to 39 years. (sec. 168)
  • In 2014, deduction and qualifying property limits will be $25,000 and $200,000. (sec. 179)
  • In 2014, off-the shelf computer software will no longer qualify for Section 179 expensing.
  • In 2014, you will receive tax credit for research and experimentation expenses (sec. 41)

For a full list of all the 2014 provisions, click here.

*Tip: Keep these provisions in mind when you’re developing your investment strategy. These types of things will effect all businesses – small, medium and large. Not only will they help give you an idea of how a company’s infrastructure may develop, but it will give you a better direction on a start up company’s financial plan.

Bottom Line

CFOs have said in 2014, emerging markets will increase, work rotation may affect financial plans of major businesses (only time will tell whether it’s good or bad), and tax provisions will alter a business’s annual returns. All of these changes will affect a company’s infrastructure in the coming months. It’s important to investigate and see how these things will affect the businesses in which you’re investing.