The launch of instant payment service FedNow last Thursday could have major implications for CFOs and how they will manage cash flow, accounts payable and accounts receivable functions in the future.

The service, which offers businesses the ability to transact near-immediate payments that flow 24 hours a day, seven days a week, will transform companies’ cash flow, allowing faster paychecks and easier expense reconciliation. FedNow payments are also irrevocable, unlike automated clearing house (ACH) transactions, which can be reversed.

To be sure, most treasurers and CFOs won’t be using FedNow immediately. Banks aren’t obligated to be part of it, and it’s unclear if or when a critical mass of them will adopt it. At launch, more than 50 banks, service providers and other entities are certified to use FedNow. In addition, the ACH network, the electronic payment network used by all banks and credit unions in the U.S., isn’t going away anytime soon. The private real-time payments network, or RTP, rolled out in 2017 by a consortium of large banks, currently reaches 65% of U.S. demand deposit accounts.

The advantages of FedNow for companies, however, are widely acknowledged: instant payments could facilitate better cash management and quicker payments to suppliers and vendors. There are planning considerations, with CFOs needing to address how it might affect liquidity and relationships with vendors, analysts say. FedNow also makes payments possible on evenings and weekends, which could change the way businesses are run.

FedNow “comes to us like a blessing and a curse,” said Eric Segal, a managing director at CFO Consulting Partners. “Finance departments are going to be getting information in their bank statements quicker…payments are going to clear pretty much immediately and if that happens, I need to be aware of that in managing my cash.”

Here are six ways CFOs and analysts say FedNow could affect businesses and their operations:

1. The disappearing ‘float’

The concept of “float,” defined as the amount of time between the initiation of payment and clearing — which can take as long as a couple of days with ACH — is a lever some CFOs rely on to manage cash, said David True, a partner at payments consultancy PayGility Advisors. With faster payments, however, that cushion goes away.

“If it costs me a lot more to borrow money, or call or the other side, if holding money earns me more with a higher interest rate, then I want to hold on to as much cash as I can for as long as I can before I pay somebody,” said True. 

CFOs, as a result, may need to adjust models and account for quicker outflows of cash.

“They’re going to have to take those models and adjust them to essentially say, ‘If this percentage of my customers move over to faster payments, then the amount of [available] dollars I have is going to decrease,’” he said. “This is something that they should have been thinking about and if they haven't, they should start immediately thinking about.”

Within companies, CFOs need to review processes to figure out how faster payments around the clock will affect operations, said Segal. 

“It’s good old fashioned process mapping,” he said. “It's just a matter of understanding the implications of the change in the way payments flow, and how that impacts your processes.”

2. New business expectations.

FedNow’s ability to enable payments all the time might raise customer and business expectations. For example, if accounts receivable departments require payments on a Friday, “if [payment] comes over the weekend, will it give someone a grace period?” said Kate Scolnick, CFO of medical device company Owlet. It could also affect mergers and acquisitions, since transactions can continue during off hours, she added.

Since the availability of FedNow may result in vendors dictating faster payment terms, companies also need to ensure it’s compatible with their technology systems that facilitate automated bill payments. 

“It would not affect us materially, as long as we were able to set it up with our existing systems and … into our enterprise resource planning systems and into our workflows,” said Michael Tannenbaum, CFO and COO of payments firm Brex. 

3. Faster payments mean heightened scrutiny.

Faster payments come with a need for more rigorous risk assessment of every actor that touches a payment transaction, including the banks involved, explained Peter Lorimer, CFO of New York-based financial technology firm Betterment. 

“We’re doing a little bit more diligence on them, just in the spirit of the fact that money can move a lot faster in the system,” he said. 

FedNow adoption could also mean shoring up fraud prevention approaches.

“When the velocity of money increases dramatically, opportunities for fraud are obviously higher,” he said. “You're still relying on your same kind of fraud risk management playbooks, but it just kind of stresses the importance of building out that institutional muscle.”

4. More efficient brand-supplier alignment for direct-to-consumer retail CFOs.

Fortune & Frame, a New York-based online jewelry retailer, said real-time payments enabled by FedNow could allow for quicker production and delivery to consumers.

“We're often dealing with tight deadlines between production and delivery to customers. The payment delay and reconciliation process with factories can add anywhere from three to five business days to their shipment time, which can translate to significant delays, said Kieran Powell, the company’s CFO. “With a factory in Rhode Island, they’re not going to start production until they’ve received the funds and reconciled it, which can take a couple of days.”

Real-time payments could also allow the company to take advantage of lower commodity prices, including the spot prices of gold and silver, he added.

5. Easier expense reconciliation.

Business expense reconciliation will get easier with FedNow, because the information included with each transaction will be more comprehensive, and it will happen faster, said True.

“It will decrease the administrative work necessary to manage your payments, both on the sending and receiving side, that's a very, very good thing that's coming about,” he said. 

Faster payments will give brands more visibility into their expenses for a given month, and cut down on time and effort required for the monthly reconciliation process, according to Powell.

6. CFOs will need to lean on their banks for support.

FedNow is hardly a top discussion topic among finance chiefs right now, Tannenbaum said.

“There's not a ton of people chatting about it yet,” he said. “I don't think there's been a lot of clear guidance about how it actually is going to work, and I haven't seen the banks pushing it.”

As a result, it will be on CFOs to seek guidance from their banks to understand the implications. 

Jim Colassano, senior vice president of product development and strategy at The Clearing House, a banking association and payments company that is owned by the largest U.S. commercial banks, suggested CFOs should consult with their financial institutions, especially since the transaction limit is currently capped at $500,000. (RTP, the real-time payments network that was rolled out in 2017 by The Clearing House, has a $1 million transaction limit.)

“This transaction limit means businesses using FedNow cannot implement certain use cases that may require transactions larger than $500,000, such as payroll funding, corporate payments to suppliers, or some real estate transactions,” he said.

The U.S. initial public offering market was a very different place back in 2021 when Clearwater Analytics CFO Jim Cox helped take his financial services software company public. 

In September of that year the Boise, Idaho-based firm, after a strong debut, was valued at over $5 billion, marking it as one of a series of successful tech unicorn launches of the time, Reuters reported. 

“It was a very different time, a very robust and, frankly, frothy market,” Cox recalled in an interview, noting the pendulum’s swing cut the other way in 2022. “Obviously, with the changes in the interest rate environment and the Fed’s action and some of the uncertainty in the economy, the IPO window closed.”

While the broader IPO market pace is still dialed back, there are some green shoots: in the first half of 2023 proceeds from companies going public rose 87% albeit it was over an anemic performance the year earlier period, with nearly half of the proceeds coming from the $4.4 billion IPO in May by Kenvue, a divestment by Johnson & Johnson of its consumer health care business, CFO Dive previously reported. 

While Cox acknowledges it’s still early days in what could be a new cycle, he believes now is a good time for CFOs and their companies to consider both whether they want to go public and, if so, how they’ll go about doing it.

But given the IPO market’s currently murky outlook and a possible recession still looming, how can executives cautiously dip their toes into the IPO waters without showing all their cards? Here are a few gauges that finance executives can use to get a feel for the market and their prospects, according to Cox:

1. Look for marquee names: One sign that a truly robust IPO market has arrived is a big name deal that prices well, Cox said. In 2021 the list of biggest companies going public was topped by the $11.9 billion deal size of electric automaker Rivian, according to a Morningstar report. In 2022 AIG spinout Corebridge topped the list with just $1.7 billion in proceeds, according to a SeekingAlpha report. For now, the tech sector side remains quiet but Cox is watching to see if new activity will be generated by buzzy AI-focused companies.  
2. Watch for LinkedIn hints of comeback’s timing: The activity on the social media site is a good gauge of forward-looking IPO trends, according to Cox. For example, in 2022 he said recruiters weren’t pinging CFOs looking for executives to take companies public. This year, there are plenty of such recruiter requests coming in but the lead time is fairly lengthy. “They’re not saying they’re looking to go public in the next six months. They’re looking to go public in the next 18 months,” Cox said. 
3. Host a bake-off: This is a step further down the path toward IPO but it’s another opportunity for companies to privately collect data. Despite its name, it does not include cookies or cake but rather refers to companies asking the investment banks to come in and pitch to be an underwriter in the upcoming public offering, Cox said. “Those folks will give you that point of view, and tell you the profile of businesses that investors are interested in,” Cox said. “You want to listen.” 
4. Early private (and sometimes friendly) meetings: IPOs conjure up visions of sleep-deprived executives rife with Wolf of Wall Street-level anxiety selling a private company’s story to skeptical investors. But the reality is that the serious work and meetings that sharpen a company’s presentations and hone in on key metrics start much earlier. Before its road show, Cox said that Clearwater Analytics early on got feedback in private meetings with about 20 investors, some of whom he’d previously worked and was friendly with. 
5. Confidential IPO filings: Companies can opt to privately file a confidential draft IPO registration with the Securities and Exchange Commission for review. This allows companies to privately get feedback on their plans, Cox said, enabling companies to “test the waters.” The SEC will look at your documents and say ‘this is wrong, this is right, please answer these questions,’” Cox said. Thereafter the filing is “flipped” and becomes public, Cox said. “Once you’re public you have to go, go go.”

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By Eide Bailly

The role of Chief Financial Officer (CFO) has become increasingly complex and demanding in recent years. The CFO is no longer solely responsible for financial management; they are now strategic partners and key organizational decision-makers.  

By effectively tackling the complex challenges that come with added responsibilities, CFOs can play a crucial role in enhancing financial performance and contributing to the long-term prosperity of their organizations.  

Here are some of the key difficulties that modern CFOs face, along with suggested approaches to tackle these challenges. 

Shifting Regulatory Environment 

One of the primary challenges facing CFOs today is navigating the ever-changing regulatory landscape. With new regulations and compliance requirements being introduced regularly, CFOs must ensure their organizations remain compliant while keeping abreast of the latest developments. Failure to adhere to regulations can result in significant financial penalties and damage to a company's reputation. 

To overcome this challenge, CFOs need to establish robust compliance processes and invest in technology solutions that can automate monitoring and reporting. This enables them to stay on top of regulatory changes, ensure accurate and timely reporting, and mitigate compliance risks effectively. 

Data Security and Privacy 

With the increasing reliance on technology and the rise of cyber threats, data security, and privacy have become major concerns for CFOs. Data breaches not only result in financial losses but can also have severe legal and reputational consequences. 

Organizations who formed incident response teams and tested their incident response plans were able to reduce the cost of a data breach by almost 40%. Today’s CFOs need to collaborate closely with their IT departments to implement robust cybersecurity measures. This includes employing encryption, multi-factor authentication, and regular security audits. Additionally, CFOs and CISOs should invest in employee training to raise awareness about data security and promote a culture of vigilance within the organization. 

Digital Solutions 

The digital transformation of business processes has revolutionized the CFO role. CFOs are expected to embrace technology to streamline financial operations, enhance efficiency, and provide real-time insights. However, implementing digital solutions can be a daunting task, requiring significant investments, change management, and integration with existing systems. 

CFOs need to take a strategic approach to digital transformation, identifying the areas that can benefit most from automation and technology adoption. They should collaborate with IT teams and evaluate suitable enterprise resource planning (ERP) systems that can centralize financial data, automate reporting, and enable data-driven decision-making. 

Economic Uncertainty 

CFOs face the ongoing challenge of navigating economic uncertainty, including market volatility, geopolitical events, and changing consumer behaviors. These factors significantly impact financial performance, making it challenging to forecast revenues, manage cash flow, and plan for future investments. 

To overcome economic uncertainty, CFOs should adopt scenario-planning techniques and stress-testing models. By simulating various economic scenarios and assessing their financial impact, CFOs can make informed decisions and develop contingency plans to mitigate risks. Moreover, establishing strategic partnerships with external consultants or industry experts can provide valuable insights into market trends and help CFOs adapt their financial strategies accordingly. 

Talent Management

Recruiting and retaining top finance talent is a significant challenge for CFOs, particularly in an increasingly competitive job market. CFOs need professionals with diverse skill sets, including financial acumen, data analysis, and business partnering capabilities. However, attracting and retaining such talent requires competitive compensation packages, professional development opportunities, and supportive work culture.

To address this challenge, CFOs should collaborate with human resources departments to develop comprehensive talent management strategies that will help enhance the finance department and benefit the entire organization. This includes providing clear career paths, offering training and development programs, and fostering a work environment that values innovation and collaboration. Additionally, CFOs can leverage technology to automate routine tasks, enabling their teams to focus on more strategic and value-added activities. 

Being a CFO in the modern business landscape is no easy task. CFOs must navigate a shifting regulatory environment, ensure data security and privacy, embrace digital transformation, manage economic uncertainty, and attract top finance talent.  

By proactively addressing these challenges, CFOs can position themselves as strategic partners, driving financial performance and contributing to the long-term success of their organizations. 

Financial institutions, like many businesses today, are intrigued by the possibilities of generative AI.

However, like many other organizations, banks are also struggling with outdated tech stacks that can hamper their ability to run this emerging technology in a way that is effective, according to Malcolm DeMayo, global VP, financial services industry for chipmaker NVIDIA.

“The conversation right now is really around helping financial firms to get prepared,” DeMayo said in an interview.

Paving the way for generative AI

NVIDIA has been investing heavily in the AI space for over a decade at this point, and financial firms are also “not new” to adopting innovative technologies, DeMayo said.

However, what makes generative AI a uniquely transformative technology when compared to other, earlier versions of AI is it is “standing on the shoulders of giants, and standing on the shoulders of the PC wave, the internet wave, the mobile wave, the cloud wave,” DeMayo said. “And it's now available to 7 billion people out of 8 billion people on the planet, completely democratized.”

NVIDIA works with financial institutions like Capital One to “accelerate the machine learning end to end pipeline,” DeMayo said.

The chipmaker, which swiftly emerged as a key player in the fast-growing generative AI space, has made headlines as investment in the new technology grows. Generative AI is helping to drive “exponential growth” in the computing space, NVIDIA CFO Colette Kress said in May during the company’s most recent earnings call. For its fiscal 2024 first quarter, the Santa Clara, California-based company reported total revenue of $7.19 billion, CFO Dive previously reported.

Since the recent dawn of OpenAI’s ChatGPT last November — which was trained on NVIDIA’s tech, DeMayo said — NVIDIA has reached a market capitalization of more than $1 trillion this year, after seeing their stock price more than triple, according to a Tuesday report by the Financial Times.

However, the world is still in the “early innings” of generative AI, he said — and banks especially face challenges to implementing the technology with their present infrastructure, he said.  

“This new generation of AI doesn't run well, at all, on the current computer infrastructure that banks have,” DeMayo said. “CPU servers just don't have enough gas.”

DeMayo described a recent conversation with a banking professional who described their infrastructure as, “they have all the geological layers of time,” he said. “So it's like, you can look at the layers and you can kind of see, okay, ‘this was this decade, this was that decade.’”

Before implementing generative AI, banks and their leadership team need to be able to innovate their outdated tech stacks and servers, which requires making the jump to accelerated computing, DeMayo advised.

Accelerated computing uses specialized hardware that helps to speed up various tasks through parallel processing, which bundles frequent tasks together, a 2021 blog post by NVIDIA explained. Financial firms must either move to the cloud where they can access this as a service — and pay as they go — or build such a base on premise, which can allow them to take advantage of the dawning generative AI age.

Boosting productivity with generative AI

Despite the increased attention — and investments — being paid to generative AI, many companies and banks have yet to budget for the necessary steps required to implement it, DeMayo said.

“If you’re a CFO, you're licking your chops, and you're thinking, ‘what do I have to do to take advantage of this?’…it comes back to making sure you're recruiting data scientists, making sure that you're building a high quality domain specific data set, and that you have access to accelerated computing, either on premise, in cloud or both,” DeMayo said.  

CFOs, who play a critical role when it comes to adopting new technologies, should look at generative AI as a way to both reduce costs and as a “way to improve productivity,” Demayo said. Many are looking for ways to improve efficiency at their organizations as economic headwinds continue to affect their businesses’ bottom line.  

For example, companies can tap generative AI to complete tasks much more quickly — both reducing one’s people cost as well as freeing up key employees to turn their attention to other, more noteworthy tasks. CFOs at banks, for example, could take advantage of generative AI models trained to act like an assistant, a junior wealth manager or a junior call center agent, lessening the number of time-consuming manual tasks that employees need to complete while also cutting down on costs.  

“The opportunity to make your people more productive is enormous,” DeMayo said. “That's how generative AI is different.”

Recent breakthroughs in artificial intelligence have dazzled C-suite executives seeking to personalize marketing, juice sales, anticipate customer needs and identify unseen risks.

The explosive spread of Google’s Bard, Microsoft’s Bing chat and OpenAI’s ChatGPT has also triggered backlash. Critics pan AI chatbots as threats to jobs, tools for “deep fake” manipulation and fountains for insights that, although seeming trustworthy, are prone to inaccuracy and bias.

The chatbots pose “profound risks to humanity,” Tesla CEO Elon Musk, Apple co-founder Steve Wozniak, and more than 26,000 other signatories said in an open letter released last month.

AI developers are “locked in an out-of-control race to develop and deploy ever more powerful digital minds that no one — not even their creators — can understand, predict or reliably control,” the open letter says. The signatories call for a six-month pause in developing systems more powerful than ChatGPT-4 and for creation of AI governance structures.

CFOs weighing adoption of AI tools need to look past both the hype and anxiety. They face the challenge of weaving the technology into company operations and reaping immeasurable rewards while not shirking their obligation to limit risk and ensure a worthwhile return on investment, according to AI experts and finance executives.

“The challenge for CFOs right now is that the frenzy around generative AI puts pressure on them to roll this out at scale,” according to Tad Roselund, a managing director at Boston Consulting Group. “You have this commercialization pressure to explore all the benefits of generative AI.”

CFOs need to demystify AI tools — identifying low-risk, high-reward uses — when even the tools’ creators cannot always explain the reasoning behind insights into core strategic topics such as emerging risks, capital allocation and new market opportunities, the AI experts and CFOs said.

To avoid failure when adopting the newest AI, CFOs should try to find a “balance of being urgent but being deliberate,” Roselund said in an interview.

AI for the rest of us

Generative AI and conversational AI such as ChatGPT — both forms of machine learning — widely expand access to advanced computing.

The software can write college essays, computer code, market research reports, jokes, translations, blogs, legal briefs and help in medical diagnosis and drug discovery. They sweep away technical and developmental obstacles and “democratize” AI, offering front-line employees computing power once available to a few, Roselund said.

Broader access has spurred a record adoption rate for conversational AI. ChatGPT hit 1 million users in less than a week, compared with 10 weeks for Instagram and 20 weeks for Spotify, according to DiploFoundation and KPMG.

The market for conversational AI will surge to as much as $20 billion by 2025, or 20% of total AI spending, according to UBS.

The potential market for generative AI may total $150 billion compared with $685 billion for the software industry, Goldman Sachs said. During a 10-year period generative AI may add 7% growth to global gross domestic and push up productivity by 1.5 percentage points.

Use of AI tools has boomed as OpenAI, Microsoft, Google and other AI innovators fight for market share. By providing free or low-cost access, they can vacuum up oceans of user feedback to improve their algorithms and gain an edge.

New AI tools help CFOs analyze data, make financial projections, prepare financial statements, manage risk and more easily supervise treasury and accounting tasks. Employees freed from routine work can turn to more creative, fulfilling projects.

Adobe, Shopify, Instacart and Zoom have adopted generative AI tools. Salesforce in March said it planned to integrate ChatGPT into Slack and meld generative AI into its customer relationship software.

Walmart uses chatbots to inform customers about simple questions including order status and returns. With verbal queries using the “Ask Sam” app, employees can locate products for sale, look up prices and check their messages or work schedule.

CFOs, at the risk of jarring employee morale, can use AI tools to trim headcount. AI automation may eventually shake up to some degree roughly two-thirds of U.S. occupations, Goldman Sachs said.

A list of at-risk jobs underscores the power of the technology to disrupt the workplace.

So-called large language models such as ChatGPT imperil jobs for workers in dozens of professions, including accountants, auditors, financial quantitative analysts, blockchain engineers, interpreters, mathematicians and journalists, according to a study by researchers at the University of Pennsylvania and OpenAI.

The technology over time will streamline at least 10% of the tasks performed by 80% of workers, and half of the tasks done by 19% of workers, the researchers said.

CFOs should not adopt generative or conversational AI without first sizing up its many risks, the financial executives and AI experts said. Some AI tools may end up on the list of much-maligned innovations that, at high cost to early adopters, over-promised and underperformed.

“AI has the potential to be yet another technology in that rogues’ gallery, especially with so much speculation that these AI systems could end up replacing workers,” according to the article describing survey findings by MIT Sloan Management Review and BCG.

AI on the sly

AI tools pose several risks. First, the spread of generative and conversational AI may undermine a company’s ability to manage or catalog AI use.

Employees who retain their jobs after adoption of the new technology will potentially gain access to vast computing power. They may engage in “shadow AI,” or computing without company oversight, and either mistakenly or deliberately leak proprietary or customer data.

Second, companies unable to fully explain how AI tools generate insights may face scrutiny from regulators, lawmakers, shareholders and other stakeholders. The “black box” hazard is especially problematic for asset managers and other AI users with fiduciary obligations.

Third, AI tools expose a company to litigation or a reputational setback by engaging in “hallucination.” They may access flawed or biased data, come to erroneous conclusions and perpetuate inaccuracies or discrimination and stereotyping.

OpenAI acknowledged last month that the accuracy of ChatGPT-4 in business applications is less than 80%. Google says in a disclaimer that “Bard is experimental, and some of its responses may be inaccurate, so double-check information in Bard’s responses.”

Fourth, wrongdoers both within and outside a company could use AI tools to improve deep fakes and other misinformation, or for schemes at phishing, impersonation and intellectual property theft.

Regulators in the U.S., Europe, China and other countries have proposed setting guardrails around AI tools. UNESCO’s 193 member states have unanimously endorsed a framework for averting AI abuses.

“The world needs stronger ethical rules for artificial intelligence,” UNESCO Director-General Audrey Azoulay said in a statement last month. “This is the challenge of our time.”

The Commerce Department this month requested public comment on ways to limit risks of AI. “Responsible AI systems could bring enormous benefits, but only if we address their potential consequences and harms,” Alan Davidson, Assistant Secretary of Commerce for Communications and Information, said in a statement.

CFOs can limit risks and tap the benefits of AI tools, financial executives and AI experts say, by taking four steps:

1. Ensure “responsible AI”

The newest AI tools highlight the imperative of constructing safeguards against abuse, the CFOs and AI experts said.

“You need responsible AI on steroids” and injected at all levels of a company, according to Roselund. “The tone from the top is incredibly important,” he said, underscoring a need to make a senior executive fully accountable for the outcome.

Responsible AI, as described by BCG, KPMG and other consultants, also ensures that the technology serves a broad range of stakeholders; mines high-integrity data; protects against attacks and rogue use; shields user data; avoids harming people, property or the environment; and is explainable, transparent and reliable.

A company adopting AI should create a cross-functional oversight team including data scientists, attorneys and the leaders of the company’s various departments.

The team should uphold standards for testing and quality control and regularly gauge risks, aware that wider use of AI within the company will require agility and shorter response times.

Employees throughout a company should be free to innovate with AI tools and find new uses for the technology but within clear boundaries, Roselund said. They need to “think outside the box but inside the circle.”

2. Widen the conventional concept of ROI

By posing unusually high benefits and risks, AI tools raise the stakes of ROI measurement, the CFOs and AI experts said.

“AI — for all its hype — still has to prove itself,” SymphonyAI CFO Wayne Kimber said in an interview. “It’s got to go from a science project with a data science engineer to something tangible for business.”

So far the payoff from AI is far from universal. While 37% of executives in 100 countries and 20 industries said their companies derive value from AI, 30% said that their businesses do not, according to 1,741 respondents to the survey by MIT Sloan Management Review and BCG.

“Aligning the achievement of individual and organizational value from AI remains a work in progress,” the researchers said, cautioning against burdening employees with the task of serving the machine.

When gauging ROI, CFOs need to recognize that valuable uses for AI tools will unexpectedly crop up as the software analyzes mountains of data, Aible CEO Arijit Sengupta said in an interview.

“People need to flip their thinking, their traditional approach to setting up ROI goals and expectations for projects that were based on a deterministic world,” he said. “Until you have actually trained the AI on the data, you have no way of knowing how to paint a nice, beautiful picture beforehand.”

CFOs derive the biggest payoff from AI tools by focusing first on increasing revenue, which is comparatively easy to measure, Sengupta said. Next, they should aim to cut costs and limit risks.

3. Adjust to AI’s limitations

OpenAI is candid about the weaknesses of ChatGPT-4, the newest version of its software.

“Despite its capabilities, GPT-4 has similar limitations as earlier GPT models,” OpenAI said in a report last month. “Most importantly, it still is not fully reliable (it ‘hallucinates’ facts and makes reasoning errors),” OpenAI said. It suggested “avoiding high-stakes uses” that lack additional context or review by human supervisors.

The creators of AI tools will gradually eliminate hallucination as they work with their clients on focussed applications, Sengupta said, adding that Aible offers software that aims to spotlight errors by double-checking answers from the AI tools.

“The hallucination problem — use-case by use-case — will get solved,” he said. “But it has to be solved before enterprises can use it.”

4. Start small

CFOs should avoid delay in sizing up AI tools given the opportunity to gain a competitive edge — and the risk of losing market share, the CFOs and AI experts said.

“Organizations need to move quickly to have a clear vision and a transformation, program-led approach,” according to Mukund Kalmanker, global head of AI solutions at Wipro.

At the same time, CFOs can maximize returns and avert waste by initially focusing on proven AI tools on a limited scale, according to Kimber. They should “line up a company with sector knowledge,” he said, “not some stealth skunkworks.”

“We’re not saying to customers, ‘Buy our platform and look for the needle in a haystack,” Kimber said. “We’re saying, ‘Hey, retail customer or fintech customer, we’ve already identified use cases that work.’”

CFOs who take an uninformed approach may push the technology into the same “hype cycle” that has disrupted the adoption of innovations for decades, the financial executives and AI experts said.

“The hype cycle in technology is well known,” even within just the AI subsector, Sengupta said, noting the C-suite mood swings over expert systems and automated machine learning.

“People get excited, then they over-invest, then they lose a lot of money, then they get unhappy, then they under-invest,” he said. “Now we’re seeing it with generative AI.”

Fresh from closing a $20 million series A financing in December, biotech firm Ratio Therapeutics’ new CFO is focused on helping his young company build a sophisticated finance department. 

Before Reed Malleck, the company’s finance chief, arrived in October there was a part-time contract CFO, a part-time contract controller and four or five people in the company who did some of the finance and accounting work, including the CEO, Jack Hoppin. 

“There was really no structure, no cadence,” Malleck said in an interview this week. “When I came in the door I said, ‘there’s no such thing as a soft close, we either close the books or we don’t.’” 

A U.S. army veteran who spent the first 22 years of his career in various finance roles at Hewlett Packard before taking multiple CFO positions in a range of companies, Malleck has quickly taken steps to build a strong financial structure for Ratio, which was founded in 2021. 

One of his main goals: to set up the people and systems needed to be due-diligence ready every day, meaning that the Boston-based firm is capable of answering any questions potential investors may have at all times.

To achieve that, Malleck is establishing departments in the company, with each department having what he termed an owner or individual who is responsible for employment and the management of the department’s resources. He’s also applying a system which he invented about 20 years, which he calls a “framework for everything.”

Most companies have some elements of it, he said. It is roughly composed of vision and mission statements and strategic objectives for the company. Objectives, he said, can last for about a year. 

“We’re setting up the cadence for the monthly close and monthly published financial statements,” Malleck said. “That’s where we’re going and that all supports many other things, it supports command and control of the business and it also supports the communication with potential and existing investors.” 

Hoppin, the firm’s CEO, said in an interview that he tapped Malleck knowing his vision was exactly what his growing company needed. Reed has set up a plan that syncs what he called the budget burn down with the company’s plans for growth this year. Hoppin said he’s also adopted Reed’s framework for everything. 

In another measure of the company’s growth, the firm moved out of WeWork space and into new 19,000-square foot space this week in Boston’s Seaport District. The space contains offices and a research facility. 

Founded in 2021, the firm now has about 30 employees and expects to continue to expand its hiring this year. The work that Malleck is doing will support that growth.  

“This all speaks to maturing Ratio in the financial management dimension,” Malleck said.

Today’s CFOs are eyeing outsourcing and new financial software solutions as ways to help boost their finance teams’ efficiency.

When it comes to onboarding new software, having a dedicated, active coaching program in place throughout the process can help finance teams have a deeper understanding of the solution, and help them to provide clearer, more impactful insights regarding the company’s data to the CFO, said Susan Gershman, chief customer innovation officer for FP&A and financial software provider Prophix.

The more familiar finance employees are with the software, the more they can impact their organization’s business results and help their CFO “be that voice at the table” when talking with the board or key figures in leadership, she said in an interview.

Driving financial insight  

For CFOs — who play a critical role when it comes to the decision to ultimately purchase new software — the biggest thing they are searching for when doing so is both the ability to collect all of their data in one place, and the ability to “use that information, not in just a reactionary reporting way, but to allow them to be proactive and model different scenarios,” Gershman said, something that active coaching and mentorship can help to achieve.

As well as the more traditional training resources such as online content, the Ontario, Canada-based Prophix also enables customers to meet with a coach, who will discuss the particular organization’s structure and needs, Gershman said.   

That way, “three months or three years from now, if they do a reorganization or they do an acquisition or they decide they want to report a completely different way,” they have an in-depth understanding of how to utilize the solution as needed because “they built it from the start, with our support,” she said.

Having that in-depth knowledge may also help to provide a competitive edge for finance teams, many of who are seeing their efficiency dip as the slumping economy both skims available resources and ups the pressure on such teams to keep the business on track, CFO Dive previously reported.

To shore up their teams’ efficiency, CFOs need to ensure they are “prioritizing the most impactful projects to create a more agile, resilient organization,” insightsoftware CFO David Woodworth previously told CFO Dive.

Supporting the CFO

While typically finance chiefs are not involved when it comes to the rollout of new software or related projects, “they do stay super involved when it comes to seeing the output,” Gershman said.

“The dashboard is put in front of the CFO and they're standing in a board meeting or an executive meeting and drilling in and slicing and dicing very, very regularly,” Gershman said.  

Having a clear, detailed view of one’s software and how it can offer the key details the finance chief needs can therefore be a boon for finance employees when it comes to their relationships with the CFO or other key members of management.  

The finance worker has been carefully educated on the software and so “can show immediate results and benefit,” Gershman said. That’s also beneficial for the manager or “the leader who had the vision and wanted this to happen; they're getting the results that they wanted and they can see that their employee has that skill and can answer questions on the fly.”