Ep. 245: Tony Klimas - The Future of the CFO Role in Finance 2025 and Beyond

December 11, 2023 | 23 Minutes

Welcome to the Count Me In Podcast! Join your host Adam Larson and today's guest, financial expert Tony Klimas, as they discuss the future of finance and insights for 2025 and beyond. Tony has 25 years of consulting experience that he brings to his roles as president for Horvath USA. Get ready for a deep dive into the evolving financial landscape and how the role of the CFO is changing. Stay tuned as Tony shares valuable perspectives on AI, machine learning, process automation, and ethical considerations in the finance function. Don't miss out on this engaging conversation with a true industry expert!

Full Episode Transcript:
 < Intro >
Adam:            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 >
Adam:            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?
Tony:              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 sort of 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.
Adam:            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?
Tony:              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.
Adam:            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?
Tony:              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.
Adam:            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?
Tony:              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.
Adam:            Yes, and they'll zoom way ahead of everybody else who's not really paying attention.
Tony:              Absolutely.
Adam:            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?
Tony:              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. 
Adam:            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.
Adam:            Yes, absolutely.
Adam:            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?
Adam:            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.
Adam:            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?
Tony:              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. 
Adam:            Yes, I'm sure there'll be a lot of more ups and downs, before we get to that really smooth spot.
Tony:              Yes.
Adam:            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.
Tony:              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.
Adam:            And when they put that into practice, I imagine they'll be more and more successful, and more profitable in the long run.
Tony:              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.
Adam:            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?
Tony:              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's 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.
Adam:            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.
Tony:              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.
Adam:            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.
Tony:              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.
Adam:            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?
Tony:              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.
Adam:            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.
Tony:              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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