CFO Challenges in 2026: What UK Finance Leaders Need to Prepare For

The role of the CFO has changed significantly. Finance leaders are no longer expected to simply manage budgets, review performance and approve investments. They are also expected to help the business make bigger decisions, such as where to reduce costs, where to invest, how quickly to adopt artificial intelligence (AI), and how to protect profitability when market conditions change.

The latest UK data reflects this shift. Deloitte's Q2 2026 CFO Survey found that 73% of CFOs are optimistic that AI will improve business performance, while 93% expect investment in digital technology to increase over the next 12 months. At the same time, reducing costs and maintaining control over cash remain important priorities for finance leaders.

But adopting AI does not automatically mean businesses are getting value from it. EY's 2026 UK CFO research found that 81% of UK finance leaders expect AI-enabled business models to play a role in their organisations, yet only 8% say AI is fully integrated into finance operations and decision-making.

This creates a new challenge for CFOs: they must continue to control costs and protect cash while also deciding where technology and AI can genuinely improve business performance.

That gap between ambition and execution is one of the defining CFO challenges of 2026.

So, what should finance leaders be preparing for?

What Has Changed for CFOs in 2026?

A few years ago, finance transformation often meant replacing spreadsheets, automating accounts payable or improving financial reporting.

Those priorities still matter, but the conversation has moved forward.

Modern CFOs are dealing with several issues simultaneously:

• pressure to control costs without restricting growth

• volatile cash flow and working capital requirements

• demand for faster and more accurate forecasts

• growing AI and technology investment

• difficulty proving ROI from new technology

• fragmented finance and operational data

• ageing ERP systems

• fraud, cybersecurity and regulatory risks

• finance skills shortages

• pressure to contribute more directly to business strategy

The challenge is therefore not simply to make finance more efficient.

It is to build a finance function capable of helping the organisation make better decisions faster.

10 Major Challenges Facing CFOs in 2026

1. Controlling Costs Without Restricting Growth

Cost optimisation remains high on the CFO agenda.

But simply cutting expenditure is rarely a sustainable strategy.

Reducing headcount, delaying projects or putting investments on hold may improve short-term financial numbers, but these decisions can create bigger problems later. They can affect customer service, limit operational capacity, slow innovation and make it harder for the business to grow.

Deloitte's July 2026 UK CFO Survey shows that cost reduction and cash control remain important priorities for finance leaders. The research also found that pressure to control costs is affecting hiring decisions, with a net 64% of CFOs expecting it to reduce graduate hiring over the next year.

The challenge for CFOs is therefore not simply to cut costs. It is to understand where costs can be reduced without damaging the areas that support future growth and business performance.

The question CFOs increasingly need to answer is:

Which costs are genuinely wasteful, and which are necessary to support future growth?

That requires more detailed visibility than a monthly P&L can provide.

Finance teams need to understand cost by entity, department, product, project, customer or business process and compare actual performance against budgets and forecasts.

This is where connected financial and operational data becomes increasingly important.

2. Protecting Cash Flow and Working Capital

A profitable company can still experience serious financial pressure if cash is tied up in overdue receivables, excess inventory or inefficient working capital processes.

For CFOs, visibility into future liquidity is therefore just as important as knowing today's bank balance.

Finance leaders need answers to questions such as:

• Which customers are likely to pay late?

• What payments are due over the next few weeks?

• How would slower sales affect our cash position?

• Are inventory levels absorbing unnecessary working capital?

• What happens to liquidity if costs rise unexpectedly?

The problem becomes harder when accounts receivable, accounts payable, inventory, purchasing and banking information sits in different systems.

Instead of relying entirely on static spreadsheets, CFOs should consider rolling cash forecasts and scenario modelling that use current financial and operational information.

Microsoft Dynamics 365 Finance, for example, provides cash-flow forecasting capabilities that can draw from areas including general ledger, accounts payable, accounts receivable, budgeting and inventory management.

3. Improving Forecast Accuracy

Forecasting has always been part of finance. What has changed is the speed at which assumptions can become outdated.

Sales demand changes. Energy and supplier costs move. New contracts are won or delayed. Customers pay later than expected. Exchange rates fluctuate.

A forecast built several months ago may therefore offer little value if it cannot respond to current conditions.

Forecasting is still a major priority for CFOs because business conditions can change quickly, and older forecasts can become unreliable within a short period of time.

Gartner's research for the 2026 CFO agenda found that 51% of CFOs ranked improving financial forecast accuracy and quality among their top five priorities.

EY's UK research also shows why AI is getting more attention in this area. 32% of finance leaders see high potential for AI in financial forecasting, while another 24% see very high potential.

However, improving forecasting does not always mean starting with advanced AI models.

For many businesses, the first step is much simpler: bringing reliable financial and operational data together, updating forecasts more frequently, comparing forecasts with actual results, and giving finance teams the ability to test different business scenarios quickly.

4. Turning AI Investment into Measurable ROI

For CFOs, the AI conversation has changed.

The question is becoming less:

"Should we use AI?"

and more:

"Where is AI actually creating measurable value?"

This distinction matters.

EY found that four in five UK finance leaders expect AI-enabled business models to play a role in their organisations over the next 12 months, yet only 8% describe AI as fully integrated into finance operations and decision-making.

There are also practical barriers. EY reports that 35% of UK finance leaders consider data quality and bias a significant challenge to AI investment, while another 24% consider it very significant. Meanwhile, 32% identify building a compelling AI business case as a challenge.

This means CFOs need to challenge AI projects on outcomes rather than novelty.

Instead of asking how many AI tools have been deployed, evaluate whether they can:

• shorten the financial close

• reduce manual processing

• improve forecast accuracy

• accelerate collections

• identify unusual transactions

• improve decision-making

• reduce operating costs

The value of AI depends heavily on the quality of the data, processes and systems underneath it.

5. Connecting Fragmented Financial Data

A CFO cannot make real-time decisions when the data required to make them takes several days to assemble.

Yet this remains common.

Finance may have one system for accounting, another for expenses, separate CRM data, operational applications, spreadsheets for forecasting and different tools across subsidiaries.

The result is usually familiar:

Teams download data, clean it, combine spreadsheets, resolve conflicting numbers and prepare reports manually.

By the time the information reaches decision-makers, the business may already have moved on.

This is not purely a reporting problem. It is a data architecture problem.

CFOs looking to improve analytics, automation or AI should first ask whether the underlying finance and operational data is sufficiently connected, timely and trustworthy.

A modern ERP can help establish a more consistent financial data foundation, while analytics platforms can give leaders access to financial and operational KPIs without repeatedly rebuilding reports manually.

6. Modernising Legacy Finance and ERP Systems

There is a limit to how much transformation can be achieved on top of ageing technology.

An old ERP may still process transactions correctly, but CFOs should consider its wider impact.

For example:

• How easily can it integrate with newer applications?

• Can management access information without manual exports?

• How much does custom code cost to maintain?

• Can new entities be added efficiently?

• Can finance processes be automated?

• Can modern analytics and AI use its data effectively?

• Is the system dependent on specialist knowledge held by a small number of employees?

Legacy ERP systems do not always need immediate replacement.

Sometimes optimisation, integration or an upgrade is sufficient.

But when the organisation is spending increasing amounts of time and money working around the ERP rather than working through it, the finance platform itself deserves review.

For CFOs, ERP modernisation should therefore be evaluated as a business case rather than simply an IT project.

7. Managing Financial Risk, Fraud and Cybersecurity

Finance holds some of an organisation's most sensitive information and processes.

Payments, supplier bank details, customer information, financial statements, payroll and cash positions all create attractive targets for fraud and cybercrime.

AI adds another dimension.

The same technologies that can improve finance productivity can also increase the sophistication of phishing, impersonation and fraudulent payment requests.

Finance leaders therefore need appropriate controls around:

• supplier and bank-detail changes

• payment approval

• segregation of duties

• unusual transactions

• system access

• financial data

• AI-generated information

• audit trails

EY's UK CFO study identified fraud detection and risk assessment among the areas where finance leaders see significant potential for AI, showing how technology increasingly plays roles on both sides of the risk equation.

The goal is not to automate every control. It is to combine appropriate technology with governance, approval structures and human oversight.

8. Keeping Up with Compliance and Reporting Requirements

As organisations expand across markets, entities and jurisdictions, the finance team's reporting responsibilities become more complicated.

Tax requirements, statutory reporting, audit preparation, internal controls and other regulatory obligations all compete for finance resources.

The challenge increases when every legal entity operates differently or uses separate applications and processes.

Manual compliance also creates hidden costs.

Highly skilled finance employees can end up spending significant time collecting information, reconciling accounts and preparing routine reports rather than analysing business performance.

Standardising finance processes and improving data consistency can therefore benefit both compliance and productivity.

Modern finance platforms can also provide structured workflows, auditability, tax management capabilities and financial reporting that help teams manage growing complexity.

9. Building the Right Finance Skills

Finance transformation is not only a technology challenge.

It is a people challenge.

As routine work becomes more automated, finance teams increasingly need capabilities in areas such as:

• data analysis

• scenario modelling

• business partnering

• automation

• AI

• technology governance

• commercial decision-making

EY found that 31% of UK finance leaders identify a lack of skills, resources or capacity as a constraint on getting full value from AI investment. Its research also found that 61% believe productivity gains will depend on combining technology investment with attention to people and skills.

This is an important point.

Buying new finance technology does not automatically transform finance.

CFOs need to consider how roles will change, which tasks should be automated, what employees need to learn and where finance should spend the time released through automation.

10. Becoming a Strategic Partner to the Business

Perhaps the biggest CFO challenge is also the biggest opportunity.

Finance has access to information that can shape pricing, investment, hiring, expansion, product strategy and operational priorities.

But many finance functions are still viewed primarily as reporting or control functions.

EY's 2026 research found that only 25% of UK finance leaders say finance is viewed as a strategic partner in value creation. Just 31% of UK CFOs say they lead long-term investment decisions where returns may be uncertain, indirect or long term.

Closing this gap requires more than producing faster reports.

Finance must be able to explain:

• what happened

• why it happened

• what is likely to happen next

• which options are available

• what each option could mean financially

That is where better data, analytics, forecasting and scenario modelling start creating strategic value.

CFO Challenges at a Glance

How Can Modern ERP Help CFOs Address These Challenges?

ERP alone will not solve every CFO challenge.

However, it can provide the financial and operational foundation required to solve many of them.

A modern ERP can help finance teams move away from disconnected applications and manual spreadsheets by connecting information across core business functions.

The important point for CFOs is that ERP selection should start with business requirements.

A system should not be chosen because it has the longest feature list. It should be selected based on the financial and operational problems the organisation needs to solve.

How Dynamics 365 Finance Supports Modern Finance Teams

For larger or more complex organisations already invested in Microsoft's technology ecosystem, Microsoft Dynamics 365 Finance is one platform worth evaluating.

Microsoft currently positions Dynamics 365 Finance around financial agility, control and insight, with capabilities spanning financial planning, budgeting, forecasting, accounting, financial close, tax management, accounts receivable, cash management and business performance management.

For CFOs, relevant capabilities include:

Financial Planning and Analysis

Finance teams can support planning, budgeting and forecasting while combining financial and operational performance information.

Cash Management and Forecasting

Dynamics 365 Finance supports cash-flow forecasting and analysis, helping finance teams assess future liquidity requirements rather than relying only on historical cash information.

Financial Close and Reporting

Automation, analytics and structured financial processes can help reduce the manual effort involved in reporting and period-end activities.

Business Performance Management

Microsoft's business performance capabilities bring together analytics, planning and insights to support financial and operational analysis.

Copilot and AI Capabilities

Microsoft continues to expand Copilot and agent capabilities across Dynamics 365 Finance. However, CFOs should evaluate individual AI use cases on measurable outcomes rather than assuming every available AI capability needs to be deployed.

Technology should support the finance strategy—not define it.

When Should a CFO Consider Modernising the Existing ERP?

Not every finance problem requires a new ERP implementation.

But there are warning signs that the existing finance environment may be holding the organisation back.

Consider reviewing your current ERP if:

• critical management reporting relies heavily on spreadsheets

• month-end close requires excessive manual reconciliation

• finance cannot access current operational information

• forecasting takes too long to update

• different entities use inconsistent finance processes

• employees repeatedly enter the same information into different systems

• integrations are expensive or unreliable

• maintaining legacy customisations is becoming costly

• new acquisitions or entities are difficult to onboard

• finance teams cannot easily use modern analytics or automation

• the current ERP is limiting wider AI or digital transformation plans

The appropriate response may be an ERP upgrade, reimplementation, integration project, process optimisation or migration to a modern cloud platform.

The first step should therefore be assessing the current environment rather than immediately selecting a replacement system.

What Should CFOs Do Next?

CFOs do not need to transform every part of finance simultaneously.

A practical approach is to start with five questions:

1. Where does finance spend the most manual effort?
Identify processes such as reconciliations, data entry, reporting, budgeting or invoice processing that consume disproportionate time.

2. Which decisions are being delayed because information is unavailable?
This highlights data and reporting gaps.

3. Which forecasts are least reliable?
Identify whether the problem is poor data, outdated assumptions or infrequent forecasting.

4. Which systems create the biggest limitations?
Look beyond licence costs and consider integration, maintenance, manual work and opportunity costs.

5. Where could automation or AI produce a measurable outcome?
Start with a business problem and define success before selecting technology.

This creates a much stronger finance transformation roadmap than simply adopting whatever technology is currently attracting attention.

Final Thoughts

The CFO agenda in 2026 contains an apparent contradiction.

Finance leaders are still being asked to protect cash, control costs and manage risk, yet they are also expected to fund growth, modernise technology and help their businesses take advantage of AI.

Doing both requires better visibility.

A CFO cannot confidently decide where to invest, where to save or which risks to take when financial and operational information remains fragmented across legacy systems and spreadsheets.

That is why finance transformation increasingly starts with the underlying data, processes and technology architecture.

For organisations that have outgrown their existing finance environment, platforms such as Microsoft Dynamics 365 Finance can provide an opportunity to connect financial processes, improve planning and reporting, introduce automation and create a stronger foundation for analytics and AI.

Dynamics Square works with UK organisations to assess, implement, upgrade and optimise Microsoft Dynamics 365 solutions. If your current ERP or finance system is making reporting, forecasting, automation or growth increasingly difficult, our Dynamics 365 consultants can help you determine the right next step before you commit to a transformation project.