< Intro >

– Welcome back to another
episode of Count Me In.

I'm your host, Adam Larson,

and today we have a special guest,
finance expert Tony Klimas.

Joining us for an insightful
discussion on the future of finance.

Tony has 25 years of consulting
experience that he brings to his role,

as President for Horvath, USA.

In this episode, we'll be exploring
the evolve role of the CFO,

the impacts of technology and innovation,

and the ethical considerations in the
ever-changing financial landscape.

Tony provides valuable insights on
managing stakeholder interests,

fostering innovation, and
addressing the challenges

brought on by automation.

Join us as we explore the
complexities of the industry,

and gain expert perspectives
on what lies ahead.

< Music >

– Tony, we're really excited to
have you on the podcast today,

and I just want to thank
you so much for coming.

And as we get started, how do you
envision the role of the CFO changing

by 2025 and beyond, in the context
of an evolving financial landscape?

– Hi, Adam, thanks, it's great to be here.

And what a great, first question

because that is what's happening today.

And I think it's been happening really,
probably, for the last 10 or 15 years.

If we can define a computing
age turning into a digital age,

somewhere, maybe around 2010 or so,

the early part of this century.

And CFOs have been
dealing with that ever since,

and they're going to
continue to deal with it.

In fact, oftentimes, when I talk to clients,

I like to remind them that we're
in the early days of this digital age.

It's like the early days, in the late 1940s,

when computers were still powered

by vacuum tubes and they
filled an entire room.

The changes and the advances
are happening so quickly,

and they're going to accelerate.

And I think CFOs, on the one hand,

it's a great time to be a CFO

because you're watching all these
fantastic, incredible things happening.

But it also presents a lot of challenges.

And the one thing I would say that's
changing the most for CFOs,

is their job is becoming incredibly more
complex than it ever was in the past.

And you see this when you look at the
organizations of large companies.

For example, the Chief Accounting Officer,

for a large part of my career
in finance and accounting,

I didn't really see
chief accounting officers.

It was usually just
a CFO and a controller.

Now it's very common to have both
a controller, a CAO, a VP of finance

who's in charge of the
forecasting and planning process,

and, then, of course, the CFO.

And you might even have other folks;

elevate, investor relations,

and you'll often even have a
digital person in there somewhere.

So the role is becoming more complex.

Who the CFO surround themselves
with is becoming more important.

And I think a lot of them, especially,

the ones who don't quite see
that coming, are struggling.

Because it's just so much more

to handle than they ever
had to handle in the past.

– And you can't talk about the
future and where things are going,

without hearing the terms
AI, and machine learning.

And it's funny because
if you ask somebody

who knows about those things,

they're like, "Well, artificial
intelligence and machine learning

have been around for a long time."

But it's advancing more
and more and more.

Do you think that what jobs
and roles, within finance,

are going to become obsolete
because of those things?

Because they're advancing so much,
that it will be taking people's jobs?

– Yes, it is a good point.

As an undergrad, I was
actually a math major,

and I actually took some courses

in neural networks, and some of
the probabilities that are being used

in some of these algorithms.

And a lot of the math hasn't
really changed that much,

but how we apply the math and,
then, of course, the computing power

is what has really created
this environment now.

Where we have all this new technology

that both mimics intelligence,
that would be AI.

And, then, of course, machine learning

is machines that are getting smarter,
as they learn from their mistakes

and then apply those,
again, in an algorithm.

And, so, I think what's changing
most, from a CFO perspective,

is it is having a huge impact on the
finance and accounting organization

in the way we work and the work we do.

In the same way that the pandemic
impacted the way we hold meetings.

And the way we now do things,
virtually, the way we work.

These technologies in accounting,

and a lot of people are still
trying to figure them out.

And, this is my opinion here, but I think
one of the ways that's very important

to think about these technologies
is they're not just side thing.

A lot of people are really enamored
with some of these Internet tools.

Where they can type a question
into Chat GPT and get an answer.

Yes, that's interesting, and it can
produce an interesting answer.

But the reality, the real
value of these tools,

is when we embed them
into the technology stack,

and we start to use them
for both decision support,

and to give us better insights
than we had in the past.

And when we start to do that, then
we unlock the value of our data

and they start to become
super valuable for us.

And, sure, we're using them

to automate things like
the closing process.

Last week I was with
the folks from BlackLine,

at their annual user conference.

They focus heavily on
AI and machine learning,

and that's going to
impact the organization.

So they is a people side of this,

and I think we're going to
talk about that some today.

But then there's also a capability side.

And if you can get the capability
ahead of your competition,

you can really get an advantage in the
marketplace, from these technologies.

But it has to be embedded,

and it has to really be part of
the fabric of how you operate,

it can't be a side thing.

In that case, it's more of a toy,
to me, than something really useful.

– Yes, it really is a toy.

Now, there was a stat that I read in
your white paper, The Finance 2025.

That said that 87% of CFOs surveyed

see an increase in process
automation as a key goal.

What are some of the opportunities there,

for CFOs as they're looking to the future?

– Well, if you go back to my original
comment about the complexity

of the CFO role, well, that's
also within their organization.

And one of the ways, we have two ways

we can manage increased complexity.

We can add more people

add more headcount, and make
our organization more complex.

And, of course, there's a lot
of costs associated with that.

And, especially, today, the reality is,
if you look at some of the statistics,

there's an accountants'
shortage that's in existence.

Young people are not
pursuing that as a discipline.

There are a whole host of other reasons,

but the reality is, we've said it for decades,

my entire working life,
"Do more with less".

But now we have some technology

that's really making that a realistic goal.

And, so, I think you see lots of CFOs
and lots of executives, in general,

who are really focused on the fact that
this is a way we can do more with less.

But, then, at the same time, we can
also create more interesting work,

more meaningful work, and really
change the way we operate.

So it's no surprise to see such a
high number making that statement.

– No, it definitely doesn't.

And as you're talking about
AI and machine learning,

the term blockchain
comes up into my head.

When it comes to blockchain,
you think of digital currencies,

and all of those things are really
changing how the finance function.

How fintech organizations are working.

How they're working with corporations.

How is that going to impact how
we look at things in the future?

– Yes, it's an interesting technology

and it's very important.

I'm glad you mentioned them almost
as separate because cryptocurrency

is just an application of blockchain.

And I think that's going to have
relevance for CFOs, at some point.

Maybe we'll transact in some of those
currencies and we'll have to do

all the things that we do right now.

With fiat currency, we'll
have to manage the cash

and make sure we're
not susceptible to fraud.

But blockchain itself,
I think a lot of people

don't fully appreciate the capabilities

and the possibilities there.

The ability to tokenize various
aspects of your supply chain.

The ability to have
contracts that are smart

and have intelligence built into them.

The way it can impact our risk
management, our audit management.

There are a whole host of finance

and accounting functions
that can be improved,

and in many cases automated by
applying the blockchain technology.

Which is, at the end of the day,
an encrypted distributed ledger.

And, so, we have to remember
what a blockchain is.

And I think any finance organization

that's not spending time
right now, in some capacity,

looking at how we can apply
this capability, this technology,

to the various things we do

both in our supply chain,
our operations accounting,

and our planning and our forecasting,

and the other aspects
of our finance function,

is making a pretty big mistake.

Because the people who
are spending time on it,

are eventually going to
have it all figured out

and they will have an advantage
within the marketplace.

– Yes, and they'll zoom way
ahead of everybody else

who's not really paying attention.

– Absolutely.
– So when you think

about blockchain, it also makes me
think of the other big term that people

are throwing around.

Not as much now because AI seems
to be the top one, but big data.

Big data analytics, there's
a lot of data we're getting

from all these different technologies.

How is that integration going to impact
the way we make financial decisions?

– I'm glad you used the term integration

because that's where the magic
happens when it comes to data.

So I'm seeing two trends right now.

One is people are now focusing more,

than they ever have in the
past, on unstructured data.

And how they use that unstructured data,

combining it with the
data we've always had.

And this has been driven,
one, by the computing power

that we now have available,
which makes that possible.

But, two, that complexity we talked about,

and the fact that the CFO is being
asked to measure a lot of things

that in the past we never measured.

And this could be related to research
and development, and innovation.

It could be related to what's
happening around ESG.

I mean, there are a lot of reasons
why that complexity is there,

but data is at the core of all that.

How we integrate the data,

how we put the decision support

and the AI into that data stack are,
ultimately, what are going to separate

the winners from the losers
when it comes to data.

I think at the core of all of it is the
computing power we have now.

Moore's Law is alive and well,
if anything, it's accelerating.

I know I had clients 15 years ago,

where the problem we were solving was—

How can we get you the insight you want,

with these technology limitations we have

around the size of the cubes
and the size of the data

that we were manipulating?

Today, with in-memory computing
and some of the other technologies,

and just the processing power we have,

and all of the advances that are
made, that's never a problem.

Now, it's how do I make
sense of too much data,

and how do I figure out what's important?

So we moved from a computing problem,

where we were running up
against physical barriers

to more of a mental problem.

How do we make sense of all this?

Because we just have so
much available to us,

and that's where people
are putting their energies.

And that's where AI, and machine
learning, and the Signal support

are really helping, if applied correctly.

– Yes, and when it's applied correctly,

it allows you to make
better strategic decisions.

As you look at that data, analyze in a way

that we as humans
couldn't even look at it.

– Yes, absolutely.
– So you mentioned ESG.

And you really can't talk
about the future of reporting

and the finance function,

without talking about sustainable

business practices, social responsibility.

It's becoming increasingly
important for the consumer,

which means it's becoming
more important for corporations.

Unfortunately, corporations don't
drive that, it has to be the consumers,

a lot of times.

But it's becoming more
and more important.

How do you see these concepts
influencing decision making,

as we go into the future,

as we go into this new technology
we've been discussing?

– Yes, and of course, Horvath,
we're an American company

but we have German roots.

And we've really been working on
this ESG topic now, for a long time.

Because I think it's really something

that's been an important
topic, certainly, in Europe,

and now it's becoming more so in the U.S.

And I know that a lot of people look at it,

some people look at it very
much as a compliance exercise.

Other people try to look beyond that.

But at the end of the day,

the problem we're trying to
solve still remains the same,

however you're looking at it.

And that is that we have to measure,

we have to account for, and we have
to take into our systems a lot of things

that we traditionally didn't
measure and didn't account for.

So there are new standards emerging.

Some of them driven
by government entities,

some of them driven
by accounting entities.

There are new ways of
reporting on these standards.

I think there are new ways
of thinking about our business.

I think the smart companies are, first off,

understanding what they have
to do, from a compliance side.

But then they're asking the question,

"What value can I drive out
of these new data sets?"

So I have some clients who
are looking very differently

at their employee data, under the
social responsibility aspect of this.

And they're thinking about
retention and recruiting,

which is always a hot topic these days.

Other companies are rethinking
the way they do governance.

Which was very, in the U.S., anyway,

formed by the Sarbanes-Oxley
legislation of 15, 20 years ago,

and all the things that happened then.

So the smart companies are not only
complying because we have to comply

and, of course, that's important.

But they're also asking the
question, "If I have to comply,

what are the other benefits
from a business perspective

that I can drive from this data?"

And, again, we have
all this new capability.

Our whole conversation is
around big data and analytics.

So I think the creative people

are taking advantage of that
and putting it to good use.

So it's still very early, the
standards are still emerging.

I don't know where any of this goes,

but I think it's here to stay in some form.

And, the sooner we embrace it,

and the sooner we understand it and
figure out how to use it for our benefit,

I think we're all better off in the long run.

– Yes, I definitely agree.

It'll definitely benefit us all,

in the long run, especially,
if you're looking at things

like sustainable business practices.

Making sure that we can do things

to help sustain us as
people going forward.

Do you think things like
the NASDAQ, ESG Index,

and things like that will be beneficial

to organizations or hinder it?

– I mean, I think to the extent that
it's helping us think about this topic,

there's a benefit there.

Because at the core of it, I mean,
I think there are valuable concepts

and ideas that people
are trying to focus on.

I think, being very frank about it,

I've talked to some CFOs
and some board members,

who question the amount
of emphasis put on it,

and trying to find the right answer there.

And, of course, it's easy to
stereotype American companies

as all being in one place.

But the reality is that's not
what I'm seeing in practice.

And I see a broad spectrum of
how people are embracing this.

And, again, some are viewing
it as a compliance exercise.

Others are viewing it as that,

but also trying to look how can
we move beyond the compliance,

and they understand, in their opinion,
that there's something important here.

So the fact that it sheds light on these
topics and gets us talking about them,

it can only be a good thing if we can
talk about them in a rational way.

And, so, I think, ultimately, we'll
land in the right spot on this.

It seems like we always do, eventually.

That's one of the beauties of free
markets and the systems we work in,

is that, eventually, we're going
to land where we need to land.

– Yes, I'm sure there'll be
a lot of more ups and downs,

before we get to that
really smooth spot.

– Yes.
– So when thinking

about everything we've
been talking about.

We've been talking
about a number of things,

about advancements in the finance
function and the finance organizations.

How can finance organizations
foster innovation and adaptability,

but while maintaining fiscal
responsibility and risk management?

Kind of what we've been
discussing a little bit.

– So it's an interesting question

because, to me, those two
actually go hand in hand.

So one of the things that we're
working on now, in the risk field,

we talk a lot about business resilience.

Which is your ability to face a
risk head-on, and fight through it,

and live to another day.

But we believe that risk management,

if done properly, can lead to something
that we call business confidence.

Then that moves you beyond
this idea of resilience,

where you can actually seek out risk,

take on the risk, and gain
competitive advantage.

So imagine just if you had a system

that was taking unstructured
data on the weather,

that was using an algorithm to help
you make better business decisions.

That could actually predict
your sales four weeks out,

with an uncanny degree of accuracy.

What would you do with that
information and that capability?

The smart company might take on

what would normally be considered risks.

They might do things with inventory,

they might do things with their
promotion and marketing budget.

Because now they have
this insight and this data,

so they have confidence
when they take these risks

that they're going to
work out in a better way.

So we believe that this
adaptability you talk about,

and that aspect of it actually goes
hand in hand with managing risk

and managing the rigidity
of the short-term thinking,

and that's really the future.

The companies that can really drive
the insights, unlock the value of data.

Ultimately, move beyond resilience
into this idea of business confidence,

and then actively seek out risk
to gain competitive advantage.

So, to us, that's something
we're working very hard on now.

Trying to help our clients work
through that, and figure out

how to put that into practice.

– And when they put that into practice,

I imagine they'll be more
and more successful,

and more profitable in the long run.

– Yes, I mean, that's the goal here.

To drive competitive advantage
within whatever market you're in,

through doing a better
job of risk management.

– Yes, speaking of risk management,
as the finance function relies more

and more on AI and automation.

What are some ethical considerations

that come into play when
you're going through that?

– Yes, that's a really tough question

because there are many sides.

Before we get to the people side, which
is probably the most important side.

One of the byproducts of all
this technology that we have,

is we have a lot more transparency

and a lot more information

at our fingertips, and it's
happening in real-time.

And, so, certainly, in
the social media world,

we know how that plays
out on a daily basis.

But it also plays out in the fiduciary world,

and the way investors and people
who invest in public companies,

consume information
about those companies.

So I think there's a whole host of
questions about transparency

and how transparent companies
will be, with their shareholders.

And, so, that's an interesting topic.

A lot of people don't think about that

because it's not that exciting and it's
boring, but it's actually really important.

And I think you'll see leading companies

will start to become more transparent,

more open, which flies in the face of
companies that don't offer guidance.

But I think they're going to
start to peel back the layers

and actually share their financial
results in real-time, or near real-time.

And, so, that will be an interesting trend.

On the people side, there are
all these changes happening.

And, so, it's easy to say, "Just deal with it".

But the reality is you can't do that.

I started my career as
mainframes were going away

and client-server computing
was becoming a thing.

And I worked in an accounting
department and I had people

who had been there for many years,

who were impacted by this
change and the birth of the ERP,

the first generation of ERP,
and shared services.

And it was important to remember that

you have to pay attention to
that, you have to figure it out.

And, so, there are ethical questions
about how you treat people,

how you deal with people.

I'm one of those people who
believes that in the long run,

no one's going to really
remember anything

except how we made them feel,

and how we treated them.

And, so, hopefully, despite the fact
that there's a lot of pressures.

There are business pressures
and societal pressures,

that somehow as we navigate
through these things,

we can pay attention to some of
the accounting and finance people.

And really, to me, it's about helping
them make the transformation,

helping them make the change.

AI is not going to make
all the jobs go away.

Machine learning is not going
to eliminate all the jobs,

but it is going to eliminate a
lot of the routine manual stuff.

And, so, helping people
get into a better place,

where they're the ones creating
the algorithms, they're the ones

applying the technology.

There's always going to be a need

for someone to sign off on
the balance sheet and the P&L,

so that's never going to
be done by a machine.

So we have to figure that out, how
to make these jobs more interesting.

And, then, hopefully, also in the
process, it creates new things

that didn't exist before.

Which is also the harbinger
of any technological change,

and there's no way to really
predict what those things are.

But we have to keep
our eyes out for them.

– Yes, we really do.

Because it makes you think of
when you see stories of people,

when the first big old computers
that took up huge rooms.

The people who learned
how to do those cards,

were the first people with jobs

because they figured out what was
the next thing that you needed to do.

And working with your organization

or working with people, as
you apply new technologies

and saying, "Hey, learn this skill,
because this is the next thing."

Is important to keep your employees

happy and move forward.

– Yes, I mean, before business,

I was a naval officer and
I went to the Naval Academy,

and I actually met
Admiral Grace Hopper.

And, for those who don't know
who she is, you can google her.

But she was the woman
who coined the term bug,

which was actually a physical bug

in the wires of a mainframe
computer in the 1940s.

But she was an amazing person who,
literally, lived through this transition

from these giant mainframe computers

into the mainframe, and
then the mini computer.

And, then, ultimately, she saw the
beginning of the PC, and the desktop.

But the one thing when you met
her is that she was always looking

to the future, and always
thinking about what came next,

and never, really, stuck in the past.

And, so, a good lesson for all of
us to maybe be like Grace Hopper.

She used to hand out pieces of wire

that were the length that light
would travel in a nanosecond,

and those were nanoseconds.

And that was her little thing that she
did, which we all remember her by.

But really it's looking to the future,
and thinking about what's coming

and then what your role is going
to be is a really good attitude,

I think, to have as we
go through these changes.

– Definitely, one thing
I was thinking about

as we were talking, and you mentioned
about how you're helping companies

think through and navigate this.

But how do you
effectively manage things,

the different competing
interests of the stakeholders?

Because you've got shareholders,
you've got employees, customers,

the community you're with.

How do you manage all those things,

as an organization, as you're trying
to move forward, be sustainable,

and make everybody happy?

Which you can never do.

– Yes, it's hard, we just keep
everybody a little equally angry,

that's how it feels some days.

I think one of the ways we do that,
and this goes back to the data

and the capability we have, transparency,

"The truth will set you
free", is a true statement.

And, so, I think, obviously, when
you have conflicting stakeholders

and conflicting objectives, one of
the keys is to find common ground.

Find something that everyone can
agree on, that at least people can,

if not fully aligned,
at least partially aligned.

And I think one of the ways
you can do that ,is by having

more transparency, more openness,

and more ways to look at the business

and how it operates
and the good it creates.

Whether it's in society
or for the shareholders.

And, so, to me, it's not an easy problem

and talk is cheap, and it's a hard
one to actually navigate through.

But the more transparent we can be,

the more open we can be, the more
we can have a common data set

that we're looking at.

I think it can only be a good thing
for solving some of those conflicts,

that are invariably going to exist.

– And I imagine it's going to
be a whole different mindset

for companies that have been around
for 100 years or 100-plus years.

They haven't always been
open and transparent,

and that's a whole different
way of looking at things.

But you have to now?

– Yes, it is.

But having been with some
very large companies

that have been around forever.

The one thing, you know,
when you go to those places,

you realize that they
wouldn't be here for so long

if they weren't really good at
adapting and changing, over time.

I mean, that's the very thing that
gives them the ability to survive.

And, so, you hope that that character
trait has stayed with them,

and they'll be able to once
again adapt and change.

And I think the ones that don't,
then they don't make it.

I mean, that's the other side of that.

– Definitely, well, Tony, I just
want to thank you so much

for coming on the podcast.

I feel like this has been
a great conversation.

We probably could talk about so
many other things within this subject,

but I just want to thank
you again for coming on.

– Yes, Adam, great to be here, and
we love to do this anytime you want.

And if people who are
listening want to talk more,

you can find me on LinkedIn,

and we would love to come and talk
to you about any of these topics.

< Outro >

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