Today’s financial leaders are still confronting economic pressures, weighing inflation, labor challenges and other headwinds against their long-term business plans. Despite these pressures, however, many CFOs are optimistic they will be able to boost their profit margins this year — with many looking to investments in emerging technologies like AI to do so, a recent study by spend management software provider Coupa Software found.   

Investing in new technologies or incremental software improvements is a “fundamental way” businesses can improve their internal processes — helping to boost the efficiency of their employees in ways that sustainably increase profit margins, Coupa CFO Michael Agresta said. By investing in new technologies to automate certain areas like sales or accounting activities, businesses can meet the key balance they need to between growth and profitability.

“You can't just say, ‘hey, run faster,’ and they run faster,” Agresta said in an interview of how to boost efficiency among employees. “You have to actually change things for them.”

Winning the efficiency game

An increasing focus on profitability represents a perspective shift especially for the technology industry, which has pivoted away from the “growth at all costs” model that was so popular over the past decade or so. Part of the reason for that shift lies in pricing pressures — with interest rates higher than two years ago, money is no longer free, Agresta said.

However, profitable growth is also generally, “the right way to scale a business over time,” he said. As businesses grow, they “eventually, once they get to a certain scale, should be at profitable growth,” he said.

Agresta took the top financial seat for the Foster City, California-based spend management software provider in November, according to a company announcement. His previous roles include serving as CFO for e-learning company Pluralsight and software provider Skupos, as well as a three-year span at Eventbrite in roles such as director of sales operations and strategic finance manager, sales FP&A, according to his LinkedIn profile.

Many finance chiefs today are eying technology as a way to help them meet their profitability targets, with 58% of finance leaders pointing to “strategic investments” in technology as a significant way to bolster their margins this year, the global study by Coupa found. That comes as 74% of U.S. leaders said they believed they would see their margins expand, according to the study shared with CFO Dive.

Investing in the right technology, in the right place, can be a strong way for business leaders to meet their profitability goals. While reducing costs is also a critical element, simply chopping expenses is “not a very sustainable way to get more and more profit over time,” Agresta said. Rather, leaders need to be able to build a “healthy, growing business,” he said — which requires investment, rather than just paring down costs.

That’s critical because to grow top line faster than expenses, companies “need to make every single person more efficient every single year,” he said. “Otherwise, every dollar out of the top line, I have to add an equivalent amount of expense, and I'm not going to become more profitable.”

The software provider is looking to automation to improve some its own internal processes, Agresta said. The company aims redo some of its systems in order to streamline those processes, he said.

Risk versus reward in the AI age

Bringing automation or other technologies to improve team efficiency is not a new strategy for businesses.  

“I think everyone's always looking to improve processes and take the lowest value work that someone's doing, automate it and move them to the highest value, because that constantly drives efficiency, and software generally just has done that over time,” Agresta said.

However, in an age where more and more business is being conducted in the digital realm — and as technology rapidly evolves — it’s important for leaders to thoughtfully consider where and which technologies they are implementing.

Without a technology team or guidelines, many businesses end up with redundant systems or “shelfware” that simply adds to their costs, without providing that much-needed lift in productivity, Agresta said.

One of the problems with software “is that once you put it in, it's really hard to take out,” he said, noting retention rates for software are typically high, “so you have to be pretty careful on what you let come in.”

It’s important for leaders to bring that same attitude to emerging technologies like AI; while the technology offers considerable promise, it’s still in its early days, with businesses lacking the data on its long-term impact or return on investment. Those are critical considerations for leaders as they balance AI’s risk versus reward, Agresta said.

“In areas where you have to be very accurate every single time, you probably [need to] take a more conservative approach on the amount of AI you're going to use there until it's very proven in areas where it isn't as big of a risk,” he said.