Digital transformation, one smart step at a time

Calculating how much value has resulted from an organization’s artificial intelligence spending could be viewed as a key part of the CFO’s job in the future, although it’s currently a tricky exercise, a Gartner analyst said Monday.

With corporate AI budgets expected to swell rapidly in coming years, finance chiefs will find themselves under rising pressure to demonstrate the return on investment for such expenditures, according to Frances Karamouzis, a senior analyst in Gartner's Research and Advisory Group focused on AI and other emerging technology issues.

“It is incumbent upon the C-suite, and specifically the CFO, to implement several different and newer approaches… [for] tracking cost, risk and ROI” around their organization’s AI investments, Karamouzis said during a presentation at Gartner’s 2024 CFO and Finance Executive Conference in National Harbor, Maryland.

Gartner predicts that AI software spending will surge to $297.9 billion by 2027, up from $124 billion in 2022. Generative AI in particular is expected to see its share of the market spike to 35% by 2027 from 8% in 2023.

In a survey unveiled by KPMG in March, nearly all (97%) of business leaders said they planned to invest in GenAI over the next 12 months, with 43% expecting an allocation of $100 million or more. 

When considering their organization’s near-term GenAI investment strategy, 39% of CEOs say they will be scaling efforts, moving from pilots to industrialization across multiple functions or business units, according to the results of a separate KPMG survey, released last month. About four out of 10 companies plan to increase their investment in GenAI next year, while 56% anticipate flat spending, the research found.  

As corporate AI expenditures grow, they will likely come under increased scrutiny in earnings calls, according to Karamouzis.  

“Some of the biggest demands that are going to impact CFOs is that they’re going to be asked essentially to… highlight on earnings calls: ‘What is your strategic articulation of your AI investments?’” she said. “Once you present that, then a couple of earnings calls later, you’re going to be asked to present: ‘Well, what was the ROI?’”

Gartner is in the process of developing a tool for calculating the ROI of AI investments, but the project is proving to be more complex than originally anticipated, Karamouzis told CFO Dive after her presentation.

“We realized that the ease of calculating ROI varies,” she said. “When you have incredible ubiquity in terms of who’s using the tool and not much specificity in terms of workflows, it makes it harder to calculate.”

AI’s potential has continued to captivate executives, but it’s important for leaders to create spaces and opportunities for their employees to experiment, said Sarah Spoja, CFO of AP automation provider Tipalti. The company offers automated accounts payable and payments management software to clients.

“I do think there is a learning curve for that and leaders need to push and give their team time and ideas and get them to start using this stuff, even before maybe it's...ready for primetime,” she said in an interview.

Creating an AI culture  

Spoja has served as finance chief for the Foster City, California-based company since 2018, according to her LinkedIn profile. She joined Tipalti after serving as a director for KKR Capstone and as a consultant for Bain & Company, coming to the CFO role from the strategy or consultant side rather than the traditional accounting route.

Those experiences color how she approaches growth, where she spends her time as a finance leader and how she thinks about hiring, she said. Last year, Tipalti reported a 41% jump year-over-year in its customer base, growing to more than 3,500 customers and processing over $50 billion in payments, according to a press release.

When it comes to examining how emerging technologies like AI will affect the financial sphere, it’s important to seek out individuals that have a curiosity about new technologies and a willingness to experiment.

“I've already had for many, many years, a bent towards people who are a bit more entrepreneurial, and a bit more technology driven inside my organization,” she said. Especially because Tipalti is a company providing products for the office of the CFO, it’s important to have team members who can spend some of their time thinking of how to make the products better, she added.

However, while it’s critical to keep that entrepreneurial spirit in mind when recruiting, that doesn’t necessarily mean searching for an individual who can fulfill a single, AI-focused role in the team, she said. Rather, the shift needs to be holistic throughout the organization.

“This is not something where you get one expert in your finance team who's an AI expert, and they're going to just change the way everyone else works,” Spoja said. “Everyone really needs to adopt it to be successful for the future.”

For CFOs and other executives, it’s essential to create space for their employees to experiment and to figure out the best way to tap the technology for their products and company.

“You’ve got to figure out and prioritize — and for every business, it'll be different — what is the biggest opportunity for this within my organization?” Spoja said.

Fixing payment pain points

Creating that space to explore for one’s team members is especially critical in spaces like payments, where AI has the potential to fix many of the pain points today’s companies deal with routinely.

Despite the steady digitization of consumer payments, business payments have remained stubbornly manual, swinging open an increasingly wide door for fraudsters. In its latest Payments Fraud and Control Survey Report, the Association for Financial Professionals found 80% of companies reported being the victims of payments fraud or attacks in 2023. Of those that were the victims of this type of fraud, 30% were unsuccessful in recovering their lost funds, the survey of over 500 treasury professionals found.

When it comes to bringing the technology into payments, therefore, it’s important to consider not only how AI could help with the transaction, “but also the workflow for the data” or insights type of processes, Spoja said. “And how does all of that integrate back to these core systems?”

For example, late last year, Tipalti launched an “auto coding” feature which taps generative AI to analyze the contents of key documents such as purchase orders and invoices. Such features ease the need for employees to review each item on a purchase order line by line as well as improving accuracy and “ensuring that basically anything that's payments executed is done through the platform,” Spoja said.

“The user rights and hierarchy in the platform ensure that the right people are signing off on payments and there's sort of a log of it,” she said. “So no one can go in and change the banking information without the user rights.”

While some of that involves the automation Tipalti has traditionally utilized inside of its platform, emerging natural language models help to code things more appropriately and to streamline the process, Spoja said.

“The payments execution piece can be kept with a very few number of people, with very clear user rights,” she said. “Versus if you do this manually, you might have a lot of people across all of your banking portals…and it's harder to control and streamline.”

Product enhancements and productivity gains are among the top benefits that business leaders expect to achieve from their planned investments in generative artificial intelligence, according to the results of a recent survey by KPMG.

The vast majority (97%) of executives indicated plans for GenAI investments over the next 12 months, with 43% expecting an allocation of $100 million or more. When asked what they saw as the greatest value creation that might come from these investments, half of the respondents said improving products and services via customer data analysis, while 48% said “enhancing efficiency to generate greater productivity.”

“We’re entering the next phase of GenAI, moving from pilots to transformational programs,” Steve Chase, KPMG’s vice chair of AI & Digital Innovation, said in a press release. “Early experimentation has proven the potential of GenAI, sparking a readiness for greater investments that will deliver enterprise-wide productivity gains, reshape business models and create new revenue streams.”

Despite the growing frenzy around GenAI, many companies are taking a measured approach toward adoption, according to Sanjay Sehgal, head of markets at KPMG. 

“They want to make sure they do this in a thoughtful way,” Sehgal said in an interview.

Given the size of the companies polled by KPMG, the dollars that are being invested into GenAI are “probably in line” with the types of outcomes that executives are hoping to achieve at this stage — if not low in some cases, he said. KPMG surveyed 220 U.S.-based business leaders representing organizations with an annual revenue of $1 billion or more.

The proportion of S&P 500 companies mentioning AI on earnings calls rose to 36% in the fourth quarter of last year, an all-time high, Goldman Sachs analysts wrote in a February research note shared with CFO Dive.

The report highlighted several companies, including Microsoft, Amazon, and IBM, that are expecting AI to produce results such as enhanced productivity, reduced costs, and improved product offerings.

In one example, IBM CFO James Kavanaugh told investors during a January earnings call that the company remains “laser-focused on our productivity initiatives as we digitally transform our business processes and scale AI within IBM.”

“This includes simplifying our application and infrastructure environments, streamlining our supply chain, aligning our teams by workflow, reducing our real estate footprint and enabling a higher value-added workforce through automation and AI-driven efficiencies,” Kavanaugh said.

KPMG predicts that GenAI performance indicators will continue to evolve over time, with early productivity boosts giving way to more transformative investments. However, enabling long-term business value first requires “meaningful investments” in areas such as data security, governance frameworks and workforce preparedness, the firm said in its release.

“When you put all of that together, that’s an investment that companies have to make to then ultimately be able to reap the value that’s going to be on the other side,” Sehgal said.

Top GenAI investment priorities currently include workforce training and capability building as well as developing governance programs to implement the technology in a responsible way, according to the release. Over half (58%) of organizations said they plan to provide mandatory GenAI skills training in the workplace. 

The research comes on the heels of a Deloitte study showing mixed views from CFOs on the outlook for GenAI investments. That poll found that finance leaders are planning to spend modestly on GenAI next year as they navigate some of the risks and uncertainties surrounding the technology.

Thirty percent of the Deloitte survey respondents indicated either uncertainty about the appropriate metrics to use for gauging the value of their investment in GenAI or a lack of current measurements. Those responding to a question about top barriers to GenAI deployment within the finance function in particular cited technical skill gaps, adoption risks, and culture and trust issues, among other concerns. 

Artificial intelligence holds great promise for the finance function — but it’s important to remember that “something doesn't need to be dramatically new for it to be really relevant and applicable,” said Suresh Bala, newly minted chief product and technology officer for Cube Software.

Especially when it comes to melding technology to fit the needs of the CFO — as opposed to the other way around — it’s important to a focus on its true applicability, Bala said in an interview, noting that he doesn’t “believe in innovation for the sake of innovation.”

A long-time alum of the software space, Bala joined the New York-based Cube, which offers FP&A software products, this month as their first CPTO as the company secured $20 million in new financing to advance their financial planning software, according to a company announcement. The funding will be used to help improve their software’s speed, usability and flexibility, Bala said, as well as applied to see how tools like AI and machine learning can best be incorporated into FP&A solutions.

For Bala, that means infusing AI in a way that keeps the focus on, “what are the objectives of the office of the CFO?” he said. “What are the goals that they have? And then how do we evolve our solution to truly meet what they are? That should be the driver.”

Supporting the strategic CFO  

Bala’s role at Cube will surround figuring out how to offer products and technologies that meet the needs of today’s CFOs “and really supports them, especially in the planning and analysis kind of space,” he said.

Bala is no stranger to this type of challenge; before joining Cube, he worked at human resources and finance software provider Workday for four years most recently as its VP of industry products, joining as part of its $1.5 billion acquisition of financial planning provider Adaptive Insights in 2018. His work included focusing on a product called Workday adaptive planning, which was also focused on the CFO.

Figuring out what today’s finance chiefs need from technology is especially critical as the role of the modern CFO continues to shift to that of a more strategic player than a pure numbers position.

“What I think the CFO brings to the table is the ability to quantify, where we are, where we are going, and why does it make sense,” he said in terms of the finance chief’s strategic role in a company. “And that's a really remarkable evolution.”

Today’s finance chiefs are taking on more and more strategic responsibilities, becoming the point person when it comes to executing on both the businesses’ short and long-term goals, which means keeping track of a vast amount of data.

“As the technology person, what to me is fascinating is, okay, if that is what the charter of the CFO is…what kinds of technologies, what kind of enablement can be done to fully support that and make that a reality?” he said. “Where you really are making these data driven decisions, and helping the organization get more systematic about defining what you're going to do?”

Easing the data burden

Solving the question of how to best aggregate and utilize data is a familiar problem for businesses, but one that still represents a significant burden — and which is landing with more frequently at CFOs’ doors.

“A good part of the CFO’s evolving responsibilities are around data governance,” Bala said, in part because finance chiefs are in some ways the customers of so much of that data. Introducing new technologies like AI represents an opportunity to ease that burden Cube will be looking to execute on with its new funding, according to the company’s announcement.

Still, Cube is drawing on new funds and Bala’s expertise at a time when AI’s potential has not been lost on anyone — including other financial technology providers. While AI funding has slowed somewhat, it still “remains the one clear bright spot in an otherwise somber fundraising environment,” with AI startups raising $42.5 billion across 2,500 equity rounds in 2023, according to a February report by CB Insights.

Furthermore, players like Microsoft have moved quickly on AI, leveraging its partnership with OpenAI to bring the technology across its enterprise offerings. It launched its AI-powered Copilot tool for finance teams in February, CFO Dive previously reported.

What CFOs are searching for, however, is a single tool that encompasses the entire spectrum of predictive analytics from data, to modeling, to forecasting and scenario analysis, Bala said.

“That completeness is, I'm pretty convinced, what the CFO needs…because that's how they can rapidly respond to their stakeholders,” he said.

A majority of CFOs are planning to spend modestly on generative artificial intelligence next year as they struggle with challenges such as measuring the technology’s real business value, according to a survey by Big Four accounting firm Deloitte.

Close to two-thirds (62%) of respondents anticipated an allocation of less than 1% of their organization’s budget for GenAI next year, according to the results of Deloitte’s Q1 2024 CFO Signals survey, released Monday. Another 37% expected between 1% and 10% of their 2025 budget to be earmarked for GenAI, while only 1% of CFOs expected an allocation of 10% to 25%.

“By taking a cautious approach to GenAI, CFOs may be waiting to see what the technology can do for their business before they commit precious time and money,” Steve Gallucci, global and U.S. CFO Program leader at Deloitte, said in a report on the findings.

Interest around GenAI in the business community is exploding, with Gartner projecting that more than 80% of enterprises will have used some form of the technology by 2026.

McKinsey predicts that GenAI could enable automation of up to 70% of business activities across almost all occupations between now and 2030, adding trillions of dollars in value to the global economy.

Still, many companies are wrestling with a host of risks and challenges associated with GenAI as they weigh potential investments, according to Deloitte.

“As both stewards and strategists, CFOs have a critical role to play to help their companies determine how best to use AI, whether for competitive advantage, greater productivity, or some other goal — and with the appropriate guardrails in place,” Gallucci said in the report.

Seven out of ten finance chiefs responding to the Deloitte survey said they anticipated a 1% to 10% increase in productivity from using GenAI, with 13% of respondents expecting the technology to yield even greater productivity.

But the research showed mixed views regarding how CFOs intend to measure the value of GenAI. Those responding to that question most often cited the category of “workforce impact, productivity, and efficiency” (40%), followed by “cost savings and expense reduction” (29%) and “return on investment and growth indicators” (16%). Thirty percent of respondents indicated either uncertainty about the appropriate metrics to use for gauging the value of their investment in GenAI or a lack of current measurements.

“The uncertainty may stem from the nascent stage of GenAI adoption, where historical data is limited,” Gallucci said in an email response to questions. “As such, while CFOs can anticipate productivity benefits based on their understanding of the potential of GenAI, they may still be exploring how to best measure specific outcomes of GenAI in these early stages.”

Finance leaders responding to a question about top barriers to GenAI deployment within the finance function in particular cited technical skill gaps, adoption risks, and culture and trust issues, among other concerns.

Deloitte polled 116 CFOs from public and privately held companies across the U.S., Canada and Mexico in February.

Microsoft on Thursday announced that it’s publicly rolling out a corporate finance version of its virtual assistant known as Copilot, which is powered by generative artificial intelligence technology.

Microsoft Copilot for Finance, which is now in “public preview” mode, has been embedded into Microsoft 365 apps such as Excel, Outlook and Teams, with the goal of making financial processes like accounts receivable collections and forecasting analysis more seamless, according to a blog post.

“We’ve been testing it ourselves as customer zero, you could say, for several weeks now,” Cory Hrncirik, modern finance lead at Microsoft, said in an interview.  

Microsoft will share the pricing for Copilot for Finance later this year when it reaches the “general availability” stage, a spokesperson told CFO Dive. 

Generative AI refers to technology that can create high-quality text, images, and other content based on the data it’s trained on. Big tech companies are betting heavily on the market, with revenues projected to reach $36 billion by 2028, according to S&P Global Market Intelligence.

A key milestone for the market was the November 2022 launch of ChatGPT, created by San Francisco, California-based startup OpenAI. Within months of its debut, the tool surpassed both Instagram and Spotify as the fastest-growing consumer application in history.

Microsoft is among companies that have moved quickly to capitalize on ChatGPT’s rapid rise. In January 2023, the Redmond, Washington-based software giant announced a multi-billion-dollar investment deal with OpenAI.

Soon after that deal, Microsoft developed Copilot, its own ChatGPT-like chatbot, which has since been added to a vast array of products and services offered by the software giant, including its Bing search engine; its suite of office software products like Word, Excel, PowerPoint, and Outlook; and its Windows operating system.

According to Microsoft executives, these investments are paying off. AI-enabled offerings helped drive $62 billion in sales at Microsoft for the second quarter of the company’s fiscal 2024, according to results released on Jan. 30.

“By infusing AI across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains,” Microsoft CEO Satya Nadella said during an earnings call at the time.

Microsoft’s various Copilots provide AI assistance “in virtually every aspect of the workflow across the different Microsoft applications,” according to tech news website ZDNET. 

Thursday’s announcement follows Microsoft’s recent release of similar role-specific virtual companions for professionals in sales and customers service. It also comes on the heels of Microsoft’s roll out of an AI-powered financial planning and analysis tool as part of the company’s Dynamics 365 Finance platform.

The Sales and Service Copilots are currently available for $50 per user per month when paid annually, or $20 per user per month for existing Copilot for Microsoft 365 users, according to tech news site VentureBeat.

The latest tool, Copilot for Finance, “is well versed in what finance professionals care about, augmenting user queries with additional prompts and insight to better automate processes and reduce the time spent on repetitive actions,” according to the Thursday blog post, which was penned by Emily He, Microsoft’s corporate vice president of business applications marketing.

The tool can also help financial analysts to reduce the risk of reporting errors and “missing unidentified variances,” according to the executive. “Rather than manually reviewing large financial data sets for unusual patterns, users can prompt Copilot to detect outliers and highlight variances for investigation,” her post said.

For every $1 companies invest in AI, they are realizing an average of $3.50 in return, according to a 2023 study conducted by research firm IDC and sponsored by Microsoft, as previously reported by CFO Dive.

Generative AI in particular could enable automation of up to 70% of business activities across almost all occupations between now and 2030, adding trillions of dollars in value to the global economy, according to McKinsey.

However, while generative AI adoption is seeing rapid momentum, it’s also running into challenges.

Microsoft has said that it’s investigating concerns that Copilot is generating bizarre and, in some cases, harmful responses, Bloomberg reported on Wednesday. Copilot told one user claiming to suffer from post-traumatic stress disorder that it didn’t “care if you live or die,” according to the report.

Google, meanwhile, has faced public scrutiny over its Gemini image-generation AI tool, which was recently taken offline for further testing after some controversial mistakes, as reported by CNBC.

The buzz around artificial intelligence has only intensified in recent months, leaving business leaders with the unenviable task of separating the technology’s potential from its reality,

While determining AI’s true applications is a must, the larger question CFOs and accounting leaders need to ask themselves is, “do you truly understand how AI is going to affect the people you hire…as well as those that are going to serve your customers?” said Susie Duong, senior director of research and thought leadership at the Institute of Management Accountants.

A CPA, Duong joined IMA two years ago. Her previous roles include a three-year stint at professional education firm Becker, and she has also served as a visiting assistant professor of accounting at University of Michigan’s Ross School of Business and an assistant professor of accounting for the NUS Business School at the National University of Singapore, according to her LinkedIn profile.

Making AI welcome

While they don’t occupy the top seat when it comes to driving generative AI strategies at their companies — a study by Gartner found CFOs were fourth on that list, behind chief technology officers, chief information officers and CEOs — finance chiefs are nonetheless intimately involved in the decision process when it comes to how and where to incorporate such technologies.

CFOs are also displeased with how digital investments across their organizations are performing, Gartner’s study found. Implementing AI is pricey, Duong pointed out; if businesses are choosing to incorporate it, “at the same time, you have to give up something else that you could have done,” she said. “This is the opportunity cost.”

To make that cost worth it, finance leaders need to ensure they’ve developed a forward-looking AI strategy that provides a return on investment or strategic benefits for the business. CFOs face challenges in four major areas when it comes to bringing AI into the finance and accounting space, according to a recent study by IMA authored by Duong: understanding the technology itself, ethics and governance, operational issues and lastly, the human element.

To take full advantage, finance leaders will need to foster seamless collaboration between the technology and their employees the IMA study found. While AI won’t replace humans, it will “tremendously impact the future of work for professionals in accounting and finance,” the report argues, and CFOs need to be fully prepared for that future. That means educating both themselves and their employees on the technology itself.

“Working with AI is more like working with a new colleague,” Duong said. “To build the trust, to some extent, you have to understand the algorithm behind it.”

That might be challenging for finance and accounting professionals, who are not typically trained on the technical side, she said. It’s important when bringing AI into the business for CFOs to “pay more attention to your people, at all levels,” she said.

“Tell them exactly why you're doing what you're doing, and why this is beneficial to them, not just to the organization,” Duong advised when it comes to educating one’s employees about the company’s use of AI. “And also provide plenty opportunities for upskilling, or re-skilling your employees.”

Bringing one’s workers into the AI conversation is critical not only because it can help smooth the technology’s way into the company, but also because workers remain wary over the potential threat AI represents to their jobs, Duong said.

In the short time since ChatGPT was launched by OpenAI in November 2022, AI job loss has already abounded, with 37% of business leaders claiming the technology replaced workers in 2023, according to a recent CNBC report. Large tech companies like Google, meanwhile, have laid off hundreds of staff members as they continue to invest further in AI, stoking replacement fears.

Leaders should “invite your employees into this whole process, especially the function that is going to be affected,” Duong said. That way, they feel as though their opinion is valued, which can help alleviate some of their fear of replacement as well as make it more likely for them to use the AI technologies that are incorporated, she said.

Prepping for the new accounting age

Finance chiefs also can’t rest on their laurels when it comes to AI education: such a thing has to be done continuously to ensure the company and its talent are keeping pace with the rapid evolution of this and other emerging technologies, Duong said.

It’s also important for CFOs to take a forward-looking approach when it comes to how AI and employees will interact with each other as the technology becomes more commonplace in the finance and accounting sector.  

Finance chiefs are already dealing with a shortage of talent in the accounting world, and while they hunt for skilled talent — or new tech to fill the gap — those that are aspiring to enter the accounting world have different expectations than the old guard, Duong said.

Today’s college students are already learning how to use AI as part of their work, Duong said — and when those students graduate and enter the accounting profession, “their perception of accounting and finance will be completely different,” she said. Finance chiefs need to consider such changing perspectives in an AI-driven world, she said.