FP&A's evolution into CFOs' essential strategic asset

Microsoft is planning a phased rollout of a new artificial intelligence tool capable of assisting corporate finance teams with cash flow forecasting and other analytical tasks, as the software giant looks to minimize risks to users in areas such as data security, according to Georg Glantschnig, Microsoft vice president of Dynamics 365 Finance.

The previously announced tool, which is intended for users of Microsoft’s Dynamics 365 Finance platform, is currently being tested with selected clients in a “private preview” phase, the senior executive with the software giant told CFO Dive.

“The biggest thing for us is, of course, that it has to live up to Microsoft security standards,” Glantschnig said in a recent interview. The company could be ready by as soon as this fall to announce a public rollout plan, he said.

Software vendors from startups to industry giants are flooding the market with new or enhanced offerings powered by generative AI, which is widely viewed in the business world as a groundbreaking technology. This comes in the wake of last November’s introduction of ChatGPT, a popular generative AI tool created by Microsoft-backed startup OpenAI.

Nearly three out of five corporate executives responding to a Salesforce survey released in March said generative AI is a potential game-changer, while one-third viewed it as over-hyped. In addition, two-thirds said they were prioritizing business use of the technology in the next 18 months, with one-third calling it a top priority.

However, the technology also prompted concerns, with seven in 10 executives saying it could expose company data to new security risks. A skills gap and integration troubles with businesses’ existing tech stacks were among other top implementation concerns.

For its part, Microsoft in recent months has begun adding generative AI to a variety of its products and services, including its Bing search engine; its suite of office software products like Word, Excel, PowerPoint, and Outlook; and its Azure cloud computing platform.

The Redmond, Washington-based company has also begun to incorporate AI features into its Dynamics 365, an enterprise resource planning platform designed to automate a range of business functions including finance, sales and human resources.

In May, Glantschnig penned a blog post announcing Microsoft’s plan to make an “extended planning and analytics” tool available to Dynamics 365 Finance users.

“Empowered by our new solution, organizations can continuously plan, looking across the enterprise at timely operational and financial data with AI-assisted insights providing critical strategic direction to accelerate innovation and guide their businesses toward sustainable success,” he wrote at the time.

The tool prioritizes “critical modern capabilities that are top of mind for today’s CFOs, such as predictive forecasting, zero-based budgeting, what-if analysis, and uncovering hidden drivers with AI-powered insights,” according to the blog post.

While CFOs have a reputation for being risk averse and slow to embrace change, many of them are now eager to adopt AI for tasks such as financial planning and analysis as they grapple with the pressures of doing their job at a time of macroeconomic uncertainty, Glantschnig told CFO Dive.

Still, he indicated that Microsoft is being careful to address data privacy issues and other potential business concerns surrounding AI, particularly in the context of uses cases such as financial planning. 

After its current “private preview” phase, the new planning and analytics tool will advance to “public preview” status, providing further opportunity for refinements before it is fully rolled out, Glantschnig told CFO Dive.

“We’re not playing around with data privacy,” he said. “It’s not something to compromise on.”

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.”

Software provider Datarails announced the full roll out of FP&A Genius, a new artificial intelligence-powered financial planning and analysis tool for CFOs.

Among other potential uses cases, the new offering is designed to enhance the speed of compiling financial analysis for business decisions, leveraging the same kind of machine-learning technology that’s behind Microsoft-backed Open AI’s ChatGPT tool, according to a Wednesday press release. The tool was introduced in beta form earlier this year, as previously reported by CFO Dive.

“The exciting and rapid evolution of AI is freeing up time for finance professionals to focus on more complex analysis and strategic decision-making and make the story around the numbers far more compelling,” Datarails CEO Didi Gurfinkel said in the release.

ChatGPT — a form of so-called generative AI technology known for a wide range of capabilities from drafting reports to answering complex questions — has grabbed the world’s attention since its launch in November, prompting a rush among software vendors big and small to introduce new AI-powered software products into the market.

Proponents say ChatGPT and tools like it have the potential to significantly streamline workflows and boost companies’ productivity.

“Instead of a finance person chasing after data, pulling together charts to show what is going on, users can simply ask Genius a question and a few seconds later have an answer,” Sloane Kolt, head of Datarails Labs, said in an emailed response to questions from CFO Dive.

However, critics worry about potential risks associated with ChatGPT-like technology, such as the potential for security breaches that could expose sensitive business information. ChatGPT has also been known for “hallucinating,” or asserting incorrect facts as if they were true, at times.

“The team at Datarails has a high percentage of finance experts and ensuring ‘hallucinations’ aren't a part of the product is top of mind for us,” Kolt said.

“When companies access their data through Datarails, it is based on the company's data connected and synced with all disparate spreadsheets and sources of data in one place, rather than an LLM [large language model],” Kolt added.

Addressing potential data protection concerns, she said FP&A Genius has been vetted using the “SOC 2” cybersecurity industry standard.

A KPMG survey released in April found that 65% of executives expected generative AI to have a major impact on their organization in the next three to five years. However, nearly the same number (60%) said they were still a year or two away from implementing the technology due to hurdles such as cost, determining clear business cases, and hiring talent to support implementation.

In addition, cybersecurity and data privacy were top concerns for respondents, at 81% and 78% respectively.

A talented, efficient finance team is table stakes for any company that wants to meet their goals, but CFOs must staff these teams with their needs and objectives in mind. When it comes to companies that are looking to scale, for example, building out the finance team means not looking for specialists, but for talent that can draw from a wide range of past experiences, said Karen Flores, newly-minted CFO of 3D AI company Leia Inc.

“You want individuals on your team that can really address a multitude of objectives for the finance organization,” Flores said in an interview.

Building a well-rounded finance team

Flores, a CFO with over 25 years of experience in the technology industry, was appointed as the Menlo Park, Calif.-based company’s top financial leader in early April, taking over from Leia’s cofounder Pierre-Emmanuel Evreux who will become a senior strategic advisor, the company said in a press release.

She will take point on the 3D display hardware provider’s financial strategy as well as “steward sustainable growth,” Leia said. The company is looking at its product roadmap over a 10-year period, Flores said, adding that one of her prime focuses as CFO is shaping the business case around its product use cases — a goal that will include building out Leia’s finance team, which is currently small and “primarily an accounting team.” 

“I think because we're still a startup, the object is to run it as lean as possible, right?” Flores said. “But you have to make sure that you're bringing in great talent to help support all those efforts, because it is going to remain a small team for a period of time.”

A veteran of the technology space, this is far from the first time Flores is stepping into “more or less” a startup environment where the finance team is small, she said.

Before moving to Leia, Flores previously served as CFO for B2B technology provider GAN Limited. She also previously served as senior vice president, finance for Maker Studios Inc, which was acquired by the Walt Disney Company in 2014, and has also held key finance roles for Myspace and Napster, according to her LinkedIn profile.  

At Napster, Flores also built “a highly talented and nimble FP&A team to support me which was, at that time, just a handful of people,” she said.

As Flores steps into the CFO seat at Leia, the aim is to concentrate on FP&A and financial reporting this year, she said, which requires finding finance employees that have a range of skill sets.

“My focus in building out this team for the next 12 months is really targeting talent that is very well rounded in terms of their experiences and the skill sets that they can bring, because when you're running a lean team initially, the team has to wear many hats,” Flores said.

Creating a growth mindset for success

Flores’ past experiences at Microsoft, Napster and other companies have given her the “tool belt” needed to steer Leia towards its future goals, she said whether that might be becoming part of a larger company or eventually going public, she said.

When taking the financial helm at startups or private companies, which are always fundraising, one needs to be nimble and react quickly, Flores said. One of Flores’ first roles as a financial analyst at Microsoft provided her with a “broad spectrum of learning opportunities,” paired with an “incredible mentor” which created a foundation enabling the rest of her career, she said.

From there, taking on her role as director of FP&A at Napster allowed her to further expand her experience, going deeper into controllership and to really start “understanding how a board functions,” she said.

Looking back on her career, “I would describe the core theme is really: taking on challenges that stretch you to the limits will prepare you for anything,” Flores said. “It won't be perfect, but it's a growth-mindset approach that builds towards greater success.”

Flores will bring her experiences to bear at Leia as she shapes its path towards growth, working together with the company’s CEO, Cecilia Qvist, who took the role last October — making the 3D AI company part of a rare group of women-led technology firms.  

While the number of women in both the CEO and CFO roles is at an all-time high, according to Crist|Kolder’s 2022 Volatility Report, they make up just over 8% of U.S. CEOs and 16% of CFOs, the report said.

Working for a women-led CEO at a technology company is an “incredible opportunity,” Flores said. While “we still have a long way to go,” she said, there have been strides made, pointing to figures such as Angela Ahrendts — a former CEO of Burberry who also served as SVP, retail for Apple — as a prime example of “incredibly successful women that are running the most valuable companies in the world.”

Additionally, studies have shown gender-diverse workplaces often outperform their competitors, with a 2021 McKinsey report finding the most gender-diverse companies were 48% more likely to outperform the least such companies.

“We're incredibly excited about what we can unlock for the company over the next five to 10 years,” Flores said of her and Qvist’s leadership.

With financial planning and analysis teams growing in size — and importance — across businesses in recent years, having data-focused FP&A executives who can look at the business like a story, with different details and pieces that all come together is key to providing accurate forecasts throughout a fiscal year, experts say. 

CFOs must understand the nuances of the different roles members of the FP&A team play on the finance team in order to hone in on each person's unique skill sets and prepare their organizations for success.

The corporate octopus

In order to visualize how FP&A teams operate differently than the accounting department, Frank D’Amelio says he likes to think of the finance function as a “corporate octopus.” 

“You've got the head of the octopus, which is the FP&A team. But then they've got tentacles into every part of the company in order to pull together that consolidated view and that complete picture of the company,” said D’Amelio, Deloitte’s US CFO Program’s CFO-in-residence, formerly Pfizer’s CFO and a veteran finance executive. 

CFOs can think of someone who is a VP of a finance function as being the supporter of a specific sector of the company — like commercial business or research development, and then think of the VP of FP&A as being the supporter of the whole business. 

“Someone in FP&A pulls together the whole company whereas the VP of Finance pulls together just one piece of the company,” said D’Amelio. 

By nature, he said, those in FP&A positions are really high performers. “This snapshot or picture of the entire business that they create is presented to the CFO who then discusses it with the leadership team, board of directors, etc.,” said D’Amelio. 

In terms of how their responsibilities vary on the day to day versus before a year-end board meeting, FP&A execs will spend most of their time putting pieces of the business together, analyzing those pieces, and creating that big picture to then connect with operational folk and prepare for when they need to give the CFO a picture of where the company is. However, no matter what time of the year it is, “these individuals are always working with the financial teams, trying to put together projections for the quarter and for the full year,” said D’Amelio.

A forward looking view 

Although both are a part of the finance function, there is a clear difference between accounting executives and FP&A executives.

Those in charge of the behind the scenes work that goes into budgets and forecasts as well as the analysis of those results, need to have a futuristic, or forward thinking mindset.

“FP&A roles are more cross functional and they might actually be more technical, especially if you're leveraging more advanced capabilities around machine learning, to support your forward looking predictability,” said Alok Ajmera, CEO of Prophix, a corporate performance management software company in an interview.

When CFOs are recruiting for such positions involved in the FP&A function, it is important that they seek curious individuals, according to Heidi Crane, veteran CFO of companies like BH Cosmetics, SurfAir and TechStyle Fashion Group and financial planning advisor.

“Companies are experiencing a skill gap,” said Ajmera,  “you can’t take your accountant that's closing the book and then turn them around and expect them to sit with the broader operations and understand how to model and track what's happening,” he said. 

There is also a shift in demographics that come into play in terms of how these individuals tend to operate, said Ajmera. 

“There was a time when CFOs and finance leaders carried a badge of honor in the sense that they would say ‘I spent my entire weekend pounding out this Excel report and I got it out Monday morning,’ and now we are in time where I would say good luck hiring and retaining talent that is willing to do that,” he said. 

People are now coming into the workforce as analysts and directors, who have grown up completely in digital environments. 

“The expectation is that they are going to be able to access data quickly, and do their job in an intelligent, technical way. And that's actually forcing something: the combination of a demographic shift in terms of people coming into the roles, and also the accessibility of technology actually starting to drive that change through the business,” said Ajmera.

All these nuances in perspectives that are emerging across the finance department functions are especially important for CFOs to keep in mind in the year ahead as challenging economic headwinds are expected to continue to require finance departments to be at the top of their games.

“In 2023, inflation, interest rate changes and supply chain disruptions will complicate the CFO's day job as their profitability forecasting will have to change in accordance with these factors. So FP&A is going to be a top concern,” said Chris Wright, managing director of global finance at Protiviti in an interview.

CFOs facing economic headwinds as 2023 begins are keeping their focus on costs, looking to reduce discretionary spending as a potential recession continues to loom.

This does not mean initiatives like digital transformation have fallen by the wayside, however: CFOs continue to view digital transformation as strategically important for their businesses.  “Irrespective of what's going on, it’s something that has to happen and still remains a priority,” said Marko Horvat, VP, research for Gartner, regarding how finance leaders are thinking about such initiatives.  

A recent study by Gartner found planning and sequencing finance transformation as well as setting a finance technology strategy roadmap were both among the top ten priorities for CFOs moving into 2023.

But finance leaders are still facing challenges when it comes to moving forward with their digital transformation initiatives. There are definitely some cost and spending pressures associated with digital transformation, Horvat said. The “big challenge with CFOs is justifying the digital investments,” he said. “So how do you measure the digital return on what you're getting?”

Recession and tech spending trends

A coming recession could change finance leaders’ strategies when it comes to digital investments or tech spending. Though inflation dropped for the sixth consecutive month in December, according to the Labor Department, concerns about a recession in the U.S. — though a potentially mild one — still remain top of mind for both CFOs and other members of the C-suite. Inflation slowed to 6.5% in December, according to the Labor Department.

Spending on automation should be “all about value,” Christina Ross, CEO of FP&A software provider Cube said in response to questions about how financial leaders can think about their technology spending among current economic trends.

Automation “should be a money-saver in the short- and/or long term,” Ross wrote in an emailed response to questions. “Once a solution is implemented, it should save time and resources, while adding enough value to more than offset the cost.”

This doesn’t mean technology budgets will necessarily shrink in 2023, Ross wrote in response to questions. But what might occur is a redistribution of spending, with more investment in automation technology while at the same time, companies take steps to reduce the number of platforms they use, for example, Ross said.

Technology spend and the finance function

An economic downturn will create a need for finance leaders to prioritize spending, but digital transformation is something CFOs “consistently rank as being really difficult,” Horvat said.

Evaluating the results of one’s digital transformation efforts is a constant challenge for financial leaders, who must also deal with finding and retaining digital talent as well as aggregating all of the information one needs across their organization in order to build a technology roadmap, Horvat said.  

CFOs currently are focusing in on the finance function when it comes to their digital transformation efforts, therefore.

“What they're prioritizing is really maturing that FP&A function, getting FP&A-specific tools to platform their planning and budgeting,” Horvat said.

Ninety percent of CFOs surveyed pointed to evaluating their finance strategy, scope and design as their top priority for 2023, according to the survey, while 83% pointed to planning finance transformation efforts.

It is also important to note that CFOs are personally involved in their organizations’ digital transformation efforts both broadly and within the finance function, Horvat said.

“I think a lot of it has to do with owning that strategy piece of it, to make sure that that it's advancing in a way that serves the interests of the organization,” he said.