Moderated by Emily, Digital transformation consultant at Hyperbots
Emily: Hi, everyone. This is Emily. I’m a digital transformation consultant at Hyperbot Sync, and I’m pleased to have John, who is the VP of FP&A at Extreme Reach, on the call with me. So thank you so much for joining us today, John, really appreciate it.
John Silverstein: No problem. Thank you for having me.
Emily: Of course. So, John, the topic that we’d be discussing today is the impact of GL coding on financial reporting and auditing and I want to begin things by asking why GL coding is so important for financial reporting and auditing.
John Silverstein: Yeah, GL coding is critical for your financial reporting and audit, otherwise it becomes very difficult to report correctly, and you have to go to the transaction level, and then it defeats the purpose of the GLs. So it’s critical. It’s also extremely hard to audit something when it’s mixed, and you’re also generally not compliant if you’re not coding things properly in the financials. So it is critical both from a reporting and audit perspective and also for management to make proper decisions and everything to make sure that selling and marketing expenses are selling and marketing expenses and then it’s easily tracked. And you know who the owners are, and you know what it is.
Emily: Got it. So let me ask you this, how does a well-structured GL coding scheme enhance decision-making for the management?
John Silverstein: Yeah, if you well structure the GL coding, the decision-making, you have to align your GL coding to not only align from an accounting and GAAP standpoint, but also to make sure that you can make proper decisions on pricing or do proper ratios and things like that based on how you break your financials out. GL coding allows you to get segment reporting and figure out how profitable certain areas, products, or service lines are. If you don’t break it out and you don’t have the right granularity, it gets complicated to figure out the important information to make decisions in the business.
Emily: Got it. So just out of curiosity, John, can you provide an example of how GL coding affects compliance with regulatory and tax requirements?
John Silverstein: Yeah, GL coding is critical. If your transactions aren’t accurately classified with GAAP, it can affect your tax calculations, anything from sales tax to VAT to corporate income tax. You can end up overpaying or facing audit issues on the tax side as well. You must follow proper accounting, have the right GL coding, and minimize penalties for noncompliance. If VAT is consistently coded under a specific GL account, it becomes much easier to prepare accurate VAT returns and comply with local tax authorities.
Emily: Got it. So what are some of the common mistakes that organizations make with their GL coding schemes, and how can they be avoided?
John Silverstein: The biggest mistake is over-complication of the GL, where you start making GL codes for everything. But then there’s the opposite side, where you don’t break things out at all, and it’s all lump amounts, which makes decision-making hard. It’s critical to find a balance between detail and summary-level data. Make sure you have proper hierarchies so you can go more granular if needed and have a proper roll-up. There are also tools now that help with different ways of reporting from a management perspective that can help this as well.
Emily: Understood. Also, John, how can a GL coding scheme be designed to provide real-time or near-real-time financial reporting?
John Silverstein: If your GL coding is proper, then as transactions are happening in your GL, ERP, or even CRM, you can see that data at the right levels in near real-time. This allows you to see where you might end up from a financial standpoint and make decisions like ramping up production or slowing down sales based on live data. It’s important to align GL coding with ERP, CRM, and procurement systems to get live financial analysis instead of waiting for month-end close.
Emily: Got it. John, would you provide an example of how GL coding alignment with business strategy can improve performance monitoring?
John Silverstein: Sure. If a company aligns its GL coding schema with key performance indicators, it can monitor and optimize these metrics more effectively. For instance, a SaaS company might use specific GL codes for different components of customer acquisition costs and retention expenses, which gives insights into performance against goals. By doing this, you can generate financial reports focusing on metrics like customer acquisition costs, helping to make more strategic decisions in real time.
Emily: Makes sense. So a little bit about the audit process, John. How does a well-structured GL coding scheme simplify the audit process?
John Silverstein: A well-structured GL coding scheme simplifies the audit process by providing a clear and consistent trail of the transactions. This allows auditors to quickly trace entries, verify accuracy, and ensure compliance with accounting standards. For example, if an organization uses separate GL codes for office supplies at HQ and regional offices, auditors can efficiently sample and analyze expenses related to different locations. However, you need to be careful to ensure your schema isn’t overly complicated.
Emily: Got it. Just to wind things up, one last question, John. What would be your key recommendations for organizations looking to optimize their GL coding scheme?
John Silverstein: First, design a hierarchical structure that goes down to a detailed level but allows summarization. Use multi-dimensional analysis so you can get different insights like company roll-ups, cost centers, departments, and product lines without mixing everything into the GL. Balance granularity and simplicity, and align with the business strategy because strategies evolve. It’s important that GL coding reflects the current business direction. Integrate with other systems like ERP to avoid silos, and regularly review your coding schema to ensure it complies with current regulations and organizational structures.
Emily: Got it. Thank you so much, John, for sharing your insights on the critical role of GL coding in financial reporting, auditing, and decision-making. Your examples and recommendations will certainly help organizations better structure their GL coding schemes to achieve more actionable financial reports. Thank you so much for being here.
John Silverstein: No problem. Glad to be here.
Moderated by Emily ,Digital Transformation Consultant at Hyperbots
Emily: Hi everyone, this is Emily, a Digital Transformation Consultant at Hyperbots. But today’s discussion, I’m pleased to have John Silverstein on the call with me. John is the CEO at Liv Data LLC, and today we’d be talking about how finance controllers can become good CFOs. But before that, John, do you mind telling us a little more about yourself?
John: Sure, thanks Emily. I’ll tell you a little bit more about LiveData, what I’m doing here as a CEO. So we’re going in and advising and consulting our CFO, alcohol candidates and going in and really advising them on how to go about their technology, people and processes and making sure that they’re making informed decisions through their data.
Emily: Thank you so much for that introduction, John. So just to kick things off, what are some of the key CFO skills that are required in the current times and how has it changed over the last decade in terms of the evolving role of a CFO?
John: Yeah, I’ll answer that first. The CFO was really looking at the past, doing some basic forecasting and budgeting and things like that. But it was just strictly the numbers and things like that and just trying to take past trends and things and try to predict what the future is in some cases. But really it was compliance, it was tax compliance, it was things like that. Now it’s a whole new animal in the sense that we have to know exactly what’s going on from the top line to bottom and then what the levers are in the business, how to operate the business, how to go about marketing sales initiatives. Should we do them? Should we not do them? We’re making decisions on the right hand side or informing the other CXO members or CEOs and things and management team to say, you should invest or you shouldn’t invest or we need to pull the brakes or we need to put our foot on the gas pedal. So we’re doing a lot of advisory work as a CFO. We’re that right hand and we have to understand not just bookkeeping the county and the rules behind that, but we have to understand the business inside now from top line all the way to the bottom line. We got it understood.
Emily: So what leadership qualities do you believe are essential for a successful CFO that might not be as critical in a controller role per se?
John: Yeah, the critical role is you have to be able to work in every department. A CFO is going to have to make decisions regarding HR hiring layoffs potentially change transformation initiatives where you might be implementing new technology that might change people’s jobs and processes and things. You also may be making decisions on sales, whether to go to certain events or go, how you go to market and those types of things. So it’s CFO needs to know exactly what’s going on. The controller needs to start building that framework and understanding to, yes, it’s from a compliance standpoint, but they need to put on the other hat a little bit and understand exactly why we’re making the decision and that it’s a business decision grounded in data accounting and those types of things. It helps, but there’s also more to decision making than just the financial numbers.
Emily: Got it. So essentially having the line of communication with every department.
John: Yeah, being able to talk to a developer and understand what they’re doing or talking to somebody on a warehouse floor or a machine floor and those types of things and not just being behind the scenes recording what’s happening. You have to be a known entity to everybody. And if you’re a trusted advisor to people that aren’t necessarily in finance in those places, then you can be a lot more successful.
Emily: Got it. And you would have seen many finance controllers transitioning into CFO successfully, you know, while some others may not. So in your view, what are the most critical skills a finance controller should develop to prepare for a CFO role?
John: Yeah, the key is being able to communicate and understand the story to all different aspects to your vendors, customers, and things like that. You can make those deals to really benefit your contract negotiations from a purchasing side. You can benefit from your communication skills on the customer side when you’re trying to get those win-win situations with your customers where you go in a market and you’re helping each other. You’re really partnering. That’s critical. And then being able to communicate complex accounting and financial and debit credits and those things to the rest of the organization to get it a more number-centric organization. A lot of people glaze over and they can’t, you know, turn their eyes the other way and things like that when they start hearing numbers, but they’re critical. If you can’t measure the business and put the KPIs in place and understand what the KPIs and how to move those KPIs, you’re not going to be successful. So it’s critical that the controller develops those skills of not just recording numbers but knowing the numbers.
Emily: True, true. How can finance controllers expand their role from managing the day-to-day financial operations to contributing to strategic decision-making?
John: Yeah, the biggest thing that is critical is to have the right processes and procedures and technology in place. If you have those things in place, then you can rely on them. The numbers are trusted. Things are you don’t have to spend your time just doing the day-to-day blocking the tackling of getting numbers right in the past. You can focus on how we improve the numbers? How do we change those levers in the business? How do you get a take action and have systems of action and things around your ERPs, around your business and things like that, where you can actually impact and change and move the needle from either top-line growth or bringing it all the way down and removing some costs or getting cash back on the accounts payable or expenses and things like that. There’s lots of opportunity out there with tax credits, things like that. If you’re staying current and understand that, you can impact the business from a strategic side and that can provide more funding to ultimately invest back in the business and grow the business even more rapidly.
Emily: I understood. Okay. And John, how important is continuous learning and professional development for a finance controller aiming to become a CFO? Can you recommend any specific area of focus?
John: Yeah, so CPAs, often you have to stay current on the accounting guidance and things like that and what might be changing. That is critical. But beyond that, it’s learning your business, understanding the industry, understanding the technology, going into the conferences for those things and seeing what’s new. Because there’s always something new happening with AI machine learning, the processes that people can do now. The other aspects of the business, you can start learning and you can start getting that industry knowledge that ultimately helps you be that partner to the CEO.
Emily: Got it. Okay, understood. And, you know, for aspiring CFOs, how important is it to have a deep understanding of their specific industry or their specific sector?
John: Yeah, it’s getting more critical than it used to be. It used to be that you just need to follow accounting guidance and you can kind of go industry to industry. Now to be more strategic, your relationships in the industry are more critical and knowing that business is more and more critical. So if you are, you can get more specific to the industry, it helps you be that strategic partner, but it’s not, it’s, you can learn an industry. A county, your accounting background will help. And if you have an operation background and other backgrounds besides just finance, I think it’s helpful as well.
Emily: Okay. And with the increasing role of technology in finance, John, you know, what technical skills or knowledge should finance controllers acquire in pursuit of a CFO role?
John: The biggest skills in the office of the CFO that they should acquire is knowing, again, the business, the technology, the people who’re involved, what the operating levers are, how to think strategically. And then that will get them to that next level and really transform the business and make it a better business and that continuous improvement.
Emily: Agreed. Okay. That’s great advice. So, thank you so much for your presence, John, you know, talking to you about this topic and the journey of a controller into becoming the CFO is honestly amazing and I truly learned so much. So, thank you for being here.
John: Yeah, thanks for having me.
Moderated by Niharika Sharma , Head of Marketing at Hyperbots.
Niharika: Greetings everyone, I’m Niharika and I take care of marketing at Hyperbots. Today we have with us John Silverstein, Chief Financial Officer at LivData, a financial consulting firm based out of New Jersey. It’s a pleasure to have you on board John, how are you doing today?
John Silverstein: Good, thank you for having me.
Niharika: Lovely, so as we decided we would be talking about the future-ready finances, building the finance team of tomorrow. But before we dive into the main topic, could you share a bit about your background and your experience as a CFO?
John: Certainly, I’ve been in the finance industry in corporate finance for over 20 years in large companies like Gillette, P&G, GE, and then eventually moved on to other industries and got a broad range of experience, particularly in the technology and professional services space. So it’s been a journey and there’s been challenges and there’s been huge growth and changes in the organization I’ve seen over the last 20 years.
Niharika: Lovely, that’s impressive. Now let’s arrive on to the talk of the hour which is building the finance team for the future. So the world is evolving rapidly, right? And so are the demands of all the finance team across the globe. What key changes do you see in the landscape that make building a future-ready finance team very, very crucial?
John: Yeah, it’s more crucial than ever. I think as time goes on and as it evolves to not just processing invoices and AR, AP, doing journal entries and those things. Now it’s how do you discuss with the sales organization, the marketing organization, have those conversations, your communication skills is more critical than ever. Your skill sets and understanding your product and industry is more critical. It used to be that you could plug and play accountants or finance people anywhere and that’s not the case anymore. I think you need that ability to understand the industry, the metrics, the KPIs, the data, the tools that are used within those that has evolved. So it takes a lot more learning, a little more critical that you understand not just the debits and credits of finance and things but you understand the actual business and how to how to manage people and understand them and bring that accountability to the organization so you can hit your goals and objectives.
Niharika: Right and I think that’s a great answer John but I would want you to build a little more on that. What according to you would be the right or specific skills and roles that will be essential for the finance professionals in coming years?
John: Yeah, the biggest skill sets I think is being able to not only think strategically and things but then go into and understand and use the tools that are out there like the AI, machine learning and those things to prep you but then tell the story of finance, go into what do the numbers mean, what do the education for the organization, be able to go in and be that right hand to the CEO, the CIO, the other C-suite professionals that you work with. It’s critical to do that and it’s not just the CFO, it starts going levels below that as well just because there’s more and more need and demand to make decisions and you can’t do that blindly anymore and you have to make them faster. You can’t wait six months to go pull data and do an analysis and things and try to figure out and make a decision. It’s make a decision today and that comes straight up so it’s decision making, it’s not black and white anymore, it’s you have to come in and understand not only the numbers but understand what the impacts are from a risk, a compliance, a IT standpoint, everything you do, every sale that is made in your company starts coming back and there’s impacts across the organization and finance is required to know that information and try to figure it out and understand it. So it’s the skill sets that are needed is the problem solving, critical thinking, being able to communicate the story of finance, understanding the actual technology that you’re doing if you’re a technology company, understanding the services of your service, understanding how you manufacture and manage the shop floor if you’re a manufacturing company, those things are more critical than just reporting, okay, here’s our cost, here’s our expense, here’s our revenue and here’s our profitability, there’s more to it and now it’s how do you manage that profitability, how do you get to a point where you can impact and change the profit and increase either lower expenses through the shop floor and understand those metrics and how to drive them, what are those levers and then from the top line you’re working with salespeople, you’re trying to figure out how you can grow sales, is it from and it’s often through just managing the data and things too but it’s also, you know, it’s going into that next level of detail is how do we get it across the line and get win-wins for our customers through, hey, we could do this, we could do that, this is how we can manufacture it, there’s solutions to these problems that we need to be able to figure out. Sorry for the long-winded answer but there’s a lot, finance has to be very broad now.
Niharika: That’s completely okay and I feel that’s a quite insightful answer and it suits the question very well and I think it’s going to be very, very enlightening for all the viewers or listeners that we have. Because upon your answer, you mentioned that we need to evolve with all the skill set and technology is evolving as we speak, picking up on that, technology is undoubtedly a game-changer. How, according to you, can the finance field leverage technology and automation to build efficient and future-ready teams?
John: Yeah, so I’ve come across this a lot recently where you’re still manually doing a lot of manual journal entries, it comes up in the audits, it comes up in this and we’re told there’s risk to it, right? But they do it because they think it’s going to keep their job or things like that but it ultimately can cost the state and lose the job. So we need to change our mindset in finance on using this, the automation and using the tools and technology to make us better so we can start talking about how even a payroll integration or an AP invoice integration or getting that data processed automatically, how it can help you. It’s adopting staying on top and understanding what’s out there, learning the tools you already have in place, not just what’s out there but you also should go to the market and see what’s out there every once in a while and understand, hey, there’s now this other tool that can really help us in finance, we need to be creative because every year there’s more and more pressure too on the finance organization, it doesn’t get easier because your targets get every year, you want to maintain profit at least if not grow profit from a percentage basis. So if you’re going to maintain that percentage and costs are going up on labor, costs are going up on material costs, you can’t always pass on all your costs in price to your customers. So you have to figure out efficiencies and a finance person has to understand how to be more efficient and the last place that gets funding for just growth is generally finance, it’s how do you do the same, well it’s just more transactions, those transactions need to be automated because you’re generally not going to get more people to do it in finance, you’re going to get more sales people to sell more, you’re going to get more operations people to deliver the service or to manufacture and things but finances is an organization and it happens to be because of the CFOs I think as well is they don’t want to be one asking for a million dollars tomorrow to grow their organization and everything when you have a goal and a budget to hit and you don’t want to be the person breaking the budget.
Niharika: Right and how according to you can the organizations attract and retain the best talent while promoting diversity in the industry?
John: Yeah and this has changed probably the most and it’s the hardest over the last couple years because of the new, there’s four generations working in the workplace for the first time ever and that creates a lot of differences in what people can do or what they want to do. You go on vacation, you’re like one generation expects you to be on vacation versus some people are on vacation, they’re not used to really turning off the computer and turning off things, they’re answering emails and things like that. There’s things like that that are just you have to understand all the people you’re working with in those four generations and be able to adopt and control and then the other challenges that you face and what’s changed in the last two years is now some people want to step back a little bit, they want to work 32 hours weeks or some people want to work the 45-hour weeks and it’s how do you adopt to this economy where people want to work from home, work from you know it’s there’s all these different nuances that have happened and it’s how do you make that happen but that’s just a piece of it. There’s then the financial pieces that’s always there but it’s not as important to some generations as others. The other piece is people want to they have to learn so if you don’t provide the capabilities for them to get educated in the new technologies and stay on top and what’s next in their career path and understanding that those things are critical that they’re not just here’s some people that just want to do the you know monotonous main tasks but they’re going to be left behind with technology so you have to keep them up even and figure out how to motivate everybody and it’s harder than ever I think again and I’ll repeat from having four generations and that mindset of changes of respecting the vacation, respecting the work hours, those types of things where it used to be work as hard as you can and as much as you can and you’ll get ahead. That’s no longer the case. It’s about efficiency and you can do more than somebody that’s working 60 hours potentially in 20 hours if you are using technologies.
Niharika: Absolutely and I think introducing technology in various domains has already helped us a lot. Talking about a little towards balancing risk and innovation, how do you feel finance leaders can ensure their teams embrace innovation while maintaining a robust risk management framework?
John: Yeah, that’s a very good question. It can be very difficult because you can go for a free-for-all where everyone’s you’re going too far down the line. Oh yeah, use chatgbt, use your AI. You have to put everything out there but then you run the risk of your data being out there and things so we need controlled environments and that’s something finance has always had from audit socks and things like that. We’ve had to go in and make sure we’re compliant and making sure we’re testing and going through. There’s a QA process similar to doing development right in those things and we can use technology again to help with that on the innovation side but we need to encourage how do we do things differently? How do we do things better? How do we go into that continuous improvement model is very beneficial to the organization so there’s a lot in there just to make sure to encourage it but when someone comes with new ideas you need to encourage those ideas. One of the things I put in place in some of my clients and things is a concept of ideation to make sure that you’re capturing ideas not just from finance but the whole organization and figuring out the impact and are you meeting the needs of the organization? You kind of figure out what are people questioning or asking or thinking about and if you have that in place in the organization it helps and then making sure you communicate on what you’re doing about it.
Niharika: Absolutely and in today’s dynamic business environment I feel agility and adaptability are crucial. How can finance teams cultivate these qualities ensuring that they can pivot quickly in response to changing market conditions or any unforeseen challenges for that matter?
John: Yeah so the key is to be dynamic too. You can’t just go in and everything you do your analysis and stuff it may be for one purpose but you need to make sure that you are thinking ahead of what else could happen if there’s changes in the landscape in the marketplace if there’s a pandemic those types of things you need to be able to flex up and down in some ways too with the economy the way people want to work and stuff that’s actually beneficial because you can you can scale up scale down a little bit easier. There’s also more resources out there from a BPO process other organizations to help you out where you can focus on your core business and make decisions around that and make sure the other areas you’re able to adjust. So maintain flexibility make the innovation and then be able to scale is the third thing with your analysis and things that you’re thinking ahead of what next do we need to look at and how we catch things that are changing in the actual economy or marketplace.
Niharika: Understood thank you for answering that John I think that’s quite insightful and will help out a lot of our listeners and viewers. So moving on to another question that I have that finance is no longer confined to be a siloed structure. How can finance leaders encourage collaboration across departments breaking down traditional barriers to foster a more integrated approach towards decision making for say?
John: Yeah my view on this is that finance can make every organization better whether it’s sales or marketing or operations by enabling the organization working with the other department heads and things on how to get their initiatives through from an approval process and a budgetary process based on you know what the impact and value they’re adding on those initiatives it’s that’s one piece the second piece is making sure that they they understand the data and information and how they’re impacting finance and what so if they make a decision they’re going to you they want to talk to you before they make decisions because they want to make the right decision when you become that trusted advisor to everybody in the organization then you’re going to make the whole organization in its entirety will make better decisions you at the same time you can’t slow down the organization from decision making so you need to be staffed appropriately goes back to that you need to be able to have that automation or have some self self-help basically for the organization where they can go in and look at a portal or look at information that can help them make their these everyday decisions that they’re making anyways so if you set things up properly up front that will scale and then when there’s questions that will come to you as well.
Niharika: Right, talking about environmental social and governance concentrations you see the concentrations are increasingly influencing business decisions nowadays how can finance teams incorporate ESG factors into their strategies as for you and what role do you think does our CFO play in driving sustainability initiatives?
John: In the sustainability initiatives is yeah so it’s critical that so that you go through and you look at that because it can hit you down the line and it goes into that risk and it’s also it goes back to that generational questions too and things is you’re not doing those initiatives and stuff people won’t want to work with you that’s a new phenomenon that you have to have these initiatives on since the ESG DEI all these different terms that are being put out there and things like that they’re they’re important they’re not just more acronyms and things like that it’s it actually drives it helps the employee morale it helps your customers you’re going to get turned down by some customers if you’re not doing it so it’s from a finance standpoint it’s going to affect your budget you’re going to have to understand what these costs are and are they you know why you’re doing them and how important they are to the organization it affects your marketing it affects everything so it’s it’s critical that finance understands it and it’s an initiative that finance needs to be a part of.
Niharika: Absolutely totally agree with your answer on that one so on the learning and developing strategy which I would like to understand from you that continuous learning is essential in the fast evolving space financial landscape as we just spoke about that what strategies can finance leaders implement to ensure their teams stay abreast of the latest technologies regulations or industries trends for that matter
John: yeah so some of it is the encouragement of your self-learning how do people keep current are they are they reading are they googling are they taking classes those types of things but you can also promote that you can have your quarterly come up with topics to what do people care about what do they want to know but that’s not even enough I think you have to go in and you need to talk to the marketplace and understand what’s out there speak to some of these sales guys that are coming in that are contacting you on linkedin and things and give them a chance to talk because that’s critical so it’s critical that you understand what you know what’s next and that you stay on top of it because there’s new technologies and things every day but you don’t even see it necessarily from just googling around you need to start talking to the vendors what are they doing with technology and things like that so it’s not just internal and on your own thing and accounting and those types of things and managing cpe credits and stuff like that is your cpa and stuff like that but actually taking the time to get the right the right information is critical and talking to people it is critical every day is to make sure or every week you make an effort to go communicate to what’s what’s next and coming talk go to the forums go to the different there’s different forums and different events and things where vendors present stuff and you learn something every time.
Niharika: Right, thank you for answering that John. So going back a few years talking about the recent COVID crisis that happened the past few years have seen really unprecedented changes how can finance teams build resilience to navigate crisis effectively and what lessons have you personally learned from leading to challenging times like this?
John: Yeah there’s there’s a lot of things that you need to have the right partners to as a business to understand to get through these times so you can’t do it alone that’s the big thing you’re not going to understand all the programs and stuff that are out there we learned during the pandemic how do you get through and get government assistance or those types of things when there’s major major crisis hopefully we don’t go through any of those again but the the key is is that you need to there’s there’s programs and things that are out there so if you again it’s similar to the last question in some ways how do you stay current you need to understand how to navigate the crisis how other people are like the bank crisis that happened with SVP earlier in the year there was constant I was able to reach out to you know the forums and things that I and my mentors and stuff like that and really understand you know what they were doing about it and change so you can come up with collaborative solutions that work not just for yourself but might work for everybody else or you might learn something from those other people the other thing is is that you need to be aware of how do you those levers of the business goes back to earlier in our conversation too is what can you do if things change drastically in the business it’s a risk assessment of the business how do you continue to operate if things go south one way or technology goes down or different things have your business continuity plans up in place have your have a plan of action you’re never going to put everything out though you’re not there’s going to be things that you have to be flexible too to be able to change.
Niharika: Absolutely, thank you so much for answering all the questions John it was indeed a pleasure talking to you and having you here with us.
John: Thank you for having me, it was great to be here.
The integration of AI into P2P processes can significantly enhance efficiency, reduce errors, and facilitate strategic decision-making. Below are key areas where AI can make a substantial difference:
Purchase Requisition & PO Approvals: AI can automate the generation and approval of purchase requisitions and purchase orders (POs) by analyzing historical data and learning approval workflows. For instance, AI systems can automatically generate purchase requisitions for inventory replenishment by predicting stock levels and processing PO approvals based on predefined criteria. AI can also convert contract documents into purchase orders.
Invoice Processing: AI-powered text processing can automate the extraction of invoice data, reducing manual data entry errors. Further, AI algorithms can match invoices with POs and Goods Received Notes (GRN), ensuring accuracy in payments.
Vendor Contracts: AI can manage and analyze vendor contracts by extracting key terms and conditions, monitoring compliance, and identifying renegotiation opportunities based on performance analytics and market trends.
Vendor Selection: By analyzing historical performance data, market trends, and risk factors, AI models can assist in selecting the most suitable vendors for procurement needs.
AI can predict optimal stock levels by analyzing trends, seasonal variations, and sales forecasts. This helps in maintaining the right balance between overstocking and stockouts, ensuring smooth operations.
Sales Tax Verification: AI systems can automatically verify the accuracy of sales tax calculations on invoices, ensuring compliance with tax regulations.
Regulatory Compliance: AI can monitor compliance with industry regulations and corporate policies by analyzing transaction data and flagging potential issues.
GL Posting and Month-end Activities: AI can automate General Ledger (GL) postings and facilitate month-end activities such as accruals, by analyzing and categorizing financial transactions accurately.
Payment Decisions: AI algorithms can optimize payment timings and methods by analyzing cash flow forecasts, vendor payment terms, and discount opportunities. This not only ensures timely payments but also maximizes cost savings through early payment discounts.
AIs potential to transform the P2P process is immense, offering opportunities to automate routine tasks, enhance decision-making, and improve efficiency across the board. By acting as a unifying force, AI can address the challenges posed by disparate systems and applications, bringing coherence and efficiency to the P2P process. As technology evolves, the role of AI in P2P processes is set to become even more pivotal, marking a new era of procurement and financial management.
The shift from traditional workflow automation to AI-enhanced processes in finance represents a leap toward more intelligent, adaptive, and strategic financial management. AI’s ability to learn and improve over time, predict future trends, and provide deep insights into financial data offers CFOs powerful tools to drive efficiency, compliance, and strategic decision-making. While traditional automation streamlines tasks based on rules and workflow, AI introduces a level of sophistication and analytical depth that transforms finance functions into proactive, strategic pillars of the organization.
The table below highlights the evolution from traditional automation, to AI-led automation.
| FINANCE FUNCTION | TRADITIONAL WORKFLOW AUTOMATION | AI-LED AUTOMATION |
| Procure to Pay (P2P) | Automates workflow, payment processing, and basic vendor management tasks based on predefined rules. Each invoice needs to be reviewed by a human. | Uses machine learning to improve invoice processing accuracy over time, predicts optimal payment timings for cash flow management, and detects fraudulent invoices through pattern analysis. Enables straight-through processing for 80% of invoices. |
| Order to Cash (O2C) | Focuses on automating order entry, credit checks based on static criteria, and straightforward dunning processes for overdue accounts. | Enhances credit scoring with dynamic models, automates personalized dunning campaigns using customer data to improve collections, and predicts future payment behaviors for credit risk management. |
| Financial Planning & Analysis (FP&A) | Streamlines data aggregation for budgeting and forecasting, relying on historical data and linear projections. | Utilizes predictive analytics for forward-looking insights, identifies trends and anomalies, and simulates various business conditions for strategic planning, offering adaptable FP&A. |
| Expense Management | Simplifies expense report submission and approval processes, enforcing policy compliance through rule-based checks. Each expense needs to be reviewed by a human. | Employs NLP and machine learning for detailed expense report audits, identifies policy violations and fraudulent patterns, and personalizes reporting guidance to reduce errors. Enables straight-through processing for 80% of expenses, and receipts. |
| Treasury | Automates cash management and forecasting based on historical cash flow patterns and executes predefined investment strategies. | Leverages advanced analytics for accurate cash flow forecasting, recommends investment strategies by analyzing market trends and the company’s financial health, and adapts to real-time market conditions. |
| Mergers & Acquisitions (M&A) | Supports data room management and basic due diligence automation, relying on manual analysis for valuation and integration planning. | Automates in-depth financial, operational, and market data analysis to uncover insights, predicts integration success, identifies synergies and red flags, and optimizes deal structuring based on strategic objectives. |
| Tax and Compliance | Facilitates tax calculation, filing, and basic compliance monitoring through rule-based systems. | Automates complex tax planning strategies, monitors compliance with changing regulations using predictive analytics, identifies potential compliance risks, and adapts to new tax laws and regulations for tax filing and reporting |
This detailed look at AI’s impact across various finance processes underscores the need for CFOs to embrace AI technologies, not just for the operational efficiencies they bring but for their potential to fundamentally redefine how finance supports and drives business strategy.
