What CFOs should fix before scaling AI in finance

In this episode of the Better Finance: CFO Insights podcast, Mike Whitmire, CEO of FloQast, explains why CFOs should prioritize workflows, data and control before scaling AI.

Key takeaways:

Recognize that AI can fail without trusted data, visibility and control across finance processes
Challenge assumptions about AI by focusing on what finance teams need to trust and adopt it, not what technology promises
Anchor AI adoption in people and behavior change, not just tools and automation
Tailor AI approaches to the scale, complexity and maturity of the finance function, rather than applying a single model
Redefine the role of finance teams, with greater emphasis on judgement, review and providing confidence in outputs

For your convenience, full text transcript of this podcast is also available.

Myles Corson

Hello and welcome to the EY Better Finance: CFO Insights podcast — a series that explores the changing dynamics of the business world and what it means for finance leaders of today and tomorrow. I’m Myles Corson from EY.
Today I am delighted to be joined by Mike Whitmire, CEO and cofounder of FloQast. So, Mike, welcome.

Michael Whitmire

Thank you for having me, Myles. Excited to be here.

Corson

Mike, as we start, CFOs [chief financial officers] today are hearing a lot about AI [artificial intelligence] and automation and the pressure to adopt new technologies quickly. But when you talk to finance teams, many are still focused on getting the fundamentals right, understanding workflows, improving processes and making sure the data behind their reporting is reliable.
You've got a really interesting vantage point on this. You started your career in public accounting. You're now the CEO [chief executive officer] and co-founder of FloQast, and through your podcast, Blood, Sweat and Balance Sheets, you're talking to a lot of CFOs, controllers, finance leaders about how the profession is evolving and transforming. Let me kick off with a question. As you're advising CFOs and finance leaders today, so much of what we talk about is just compounding problems and things on top of each other. What's the one thing that you're recommending CFOs to stop doing, that's actually holding them back from achieving the potential of the finance organization they're leading?

Whitmire

To stop doing? That's a great question. A lot of it is you can kind of no longer operate in the status quo environment, which is a very vague terminology. So, we like to try to put that into practice a little bit more. And what we found is we have conversations with a lot of CFOs and controllers and there's pressure from the board around deploying AI and how to adopt it and implement it.
Then, you go into the reality of a conversation. And I remember there are many CFOs I've chatted with where they're getting that pressure. And then we go into explain FloQast, kind of show them what we do from an AI perspective. And oftentimes the conversation pulls back to, I just need visibility to what my team's doing. I don't even know what's going on with my team. I need a checklist. And it's like, okay, maybe we actually need to stop focusing on AI so much right now and get the fundamentals in place and get the basics laid out there.
And I'm finding that conversation, which is really the founding story of FloQast, is around helping your team collaborate, getting control around your month and close process, reconciliations, posting journal entries. That's sort of the meat and potatoes of getting your financial statements out. And you need to be good at those things before you can really dive too far into AI deployment and adoption. So oftentimes we're like, hey, maybe stop focusing too much on the AI part and let's get the foundation right. And that's getting your people working on the same page, getting your workflows documented.
Getting your data centralized is a really important part of all this or other data projects that need to occur. Before we had too far down the road with AI. But we don't want to encourage putting a Band-Aid on a broken foundation or trying to fix a broken foundation. You have to go back and do the hard work of fixing the foundation before you build on top of that to extend the home building analogy that we had going on earlier today. So, it's really pretty basic stuff.

Corson

There's such a temptation to look at the new shiny objects and want to talk about how you do the exciting stuff. But that point you make about getting the foundation right is so important. And are there things that you, organizations you've worked with, you've seen do really well in that foundational build? What are the things that in your experience really make a difference?

Whitmire

One of the things we noticed is and I'll go back to my experience doing this. What's interesting about accounting in the month-end close is it's a large team of individuals often working on their own tasks and you need to orchestrate all that to get one common goal achieved, which is issuing the financial statements and getting that to the auditors. And from EY's [Ernst & Young LLP] perspective, hopefully getting it to them on time or early to give some time to get the audit done. So, it is really challenging to get control around what the team is working on. And so that's just kind of an early focus of ours.
And what we found is when you go to market, oftentimes those individuals have their own little checklist that they use to get through the day. So, it's not that there's no documentation. It’s that that documentation is decentralized. We generally find ourselves going to a controller. Are you aware of those checklists? Do they exist? And then you kind of get the team to start sending them, sharing them. You centralize it. And all of a sudden, you pick your head up and you do have a month-end closed checklist, or you have a checklist for running your accounting operations. And then you can get that into a solution like FloQast to have a little bit more control around it. Have it centralized and give controllers that dashboard view into everything that's going on within their team.
And then, once you have the workflow documented, then you can start to look through the work and understand, hey, where can we deploy automation? Where can we deploy AI? Where does it make sense? And so, I really view the foundation of a checklist as your roadmap to automating some of the work within your accounting department. The general situation we see is there's some documentation, it's just not all on the same page. Or it's very basic. It's things like close cache, close AR [accounts receivable], close fixed assets. And it's like, we need a little bit more detail and documentation around how we do our work for that. So that's generally what we found. We come in and we help with on a baseline is centralizing your documentation or expanding a bit more on the documentation that you have today.

Corson

So, it's already bringing more discipline to that workflow, more structure. It's such an important thing in the context of knowledge work to be able to really understand how flows of work and activity and the data that supports it operates in a corporate environment.

Whitmire

We found there's such a spectrum of efficiency and readiness across accounting departments. It's really difficult to just peg accounting of being at one point of readiness. To the kind of extreme of we ended up putting together what we call an AI maturity index and where we'll sit down with the controller and we have our perspective on. It's really five levels of automation. And walk them through our perspective on what it means to be within each of those five levels of the journey. And, we have them help us understand where they're at in that journey.
And that really helps set the stage for what should we be working on next is where are you on this one to five scale of maturity around your department. And it's all over the map. A lot are level one, a lot are level three, a lot are level four. It's all over the place and you need to have a different approach to helping each department solve the challenges that they have.

Corson

You and I both, CPAs [Certified Public Accountant], charred accountants, we've sort of worked in this world for a long time. And one of the things that strikes me is, it's almost a cliche, but accountants like structure and like definition. And we all grew up with checklists and being able to follow through. So, in terms of how the change management works and the adoption. Presumably this is something that when you work with it seems actually it's welcome because people want to embrace it. They like the structure given the training in the background they have.

Whitmire

I think this is part of why FloQast really excels at building software. We worked in accounting. And so, we have that very clear perspective of what it's like to get through the job every day and every month. And it's comical when I juxtapose how our software works and what it does with sort of what expectations are from those outside of the industry —namely my investors and venture capitalists.
Cause we come in with the very practical approach and something that's easy to use for accountants. But from a tech perspective, it doesn't necessarily come across as cool as they would expect. So, for example, with AI right now, the expectation from those outside of the accounting world is that accountants are going to log into a page with a text box, just like AI. And they're basically going to say, “do accounting for me.” And it's going to spit out all your financial statements. And I'm like, guys, that sounds really cool. I'm sure you have entrepreneurs coming in, pitching all of that to you.
The idea of a command line GL [general ledger] I'm sure is becoming really popular. But I'm telling you as an accountant, the idea of doing that and not having context around where my work's being tracked, how it's getting done, what's my audit readiness around this, are these numbers accurate or not? Do I really trust an agent spitting out one thing? It's just terrifying and is not going to ultimately be adopted by the market.
Accountants, we need a certain level of control. We need context into how all of our work is getting done. And within accounting, the context is really, where's the checklist? Where's my documentation? Where are the reconciliations? Where are the journal entry? And I want to see all that in one page and have access to it to give me comfort that the work is getting done and it's getting done accurately. So I think that's one of our superpowers is being able to take the tech and all of the power that it can provide. But then kind of pull it down to the reality of how accounting gets work done and make it so it's something that is easy to use and adopted by accountants.

Corson

You use the word comical and the one thing I'll also put a plug in for is your PBC YouTube series, which I think is so funny. I mean, again, there's the sort of ability to poke a bit of fun at the accounting profession. But also tell the story of what is actually like, to your point, to help people understand what happens in accounting is phenomenal. You're doing the profession a great service with that and you clearly are, I think, the most marketing — one of the most marketing-savvy accountants.

Whitmire

As you say, that was kind of interesting is you might be able to draw a comparison with how the show PBC comes off as so by accountants, for accountants, because we were in the weeds, right? I was at Ernst & Young, then I was at a publicly traded company that went through audits. So I saw it on both sides. And in talking with accounts from other companies and auditors from other firms, it's consistent, kind of how it works behind the scenes. And so, the amount of inside baseball humor. All the acronyms we have, the seemingly simple challenges around requesting documentation then getting into a fight over it.
It's all very real for accountants. And I think that kind of concept plays out in our product as well. It's very much by accounts, for accountants. So yeah, thank you for the plug. I appreciate it. Those of you who haven't seen PBC, we've shared it on YouTube It's sort of like the office but very directly for accountants and auditors with a lot of inside baseball humor.

Corson

Yeah, I highly recommend. So just come back to this AI talk, Mike, because obviously, you we've all to talk about it. This question of AI readiness and where we are on the journey. It would be helpful, I think sometimes to bust a few myths. And it goes back to your previous comment. Oh, AI will solve it. Yeah, but how?
One of the questions, I think it's really important is, where are organizations that you're working with on the AI readiness journey? Because I think this expectation is going to happen overnight and it's going to be so dramatic. I think, to your point, there's actually a lot of foundational stuff that needs to be done to achieve that. What's one thing that you would say to CFOs, controllers, finance teams, that they need to be able to come together on and talk about to really get right, to be able to scale up that investment? And then, what do you think the starting point is in general terms at the moment?

Whitmire

Looking across our install base, for example, we have 3,500 companies using FloQast and looking across our base. We still believe that about half of them are very early in that journey, beyond the documentation phase. Because by definition, if you're using FloQast, you've documented your work. But more in that either trying to optimize their processes to really then drive automation on an optimized checklist.
So, sort of in that level what we call level two to level three. That's about half of them. About 30% of our client base, they've deployed automation capabilities pretty aggressively. So that's something like maybe ingesting data from one system, reviewing it and posting a journal entry end to end. Something to that effect or rather basic one.
And then we have that last 20% that is starting their AI journey. And generally, what we like to recommend is starting small with it. Improving value and ensuring that your team adopts it. Because one of my big concerns is a company goes out there and makes a really big purchase. They buy into a really big vision, then they don't get any practical value out of it.
And so, we want to come to the table with a practical approach for looking at one, two or three processes and think about “how can we deploy AI across those processes to make us more efficient?” And we have about 20% of our customers at that phase starting to roll it out. Then there's a small subset, call it a half a percent. But they were very aggressive in the journey and they've deployed AI across dozens of workflows at this point. Either we or EY teams actually have helped them get to that point in their journey as well.
One thing that isn't considered much, at least from the outsider's perspective, is how much nuance there is to accounting. I think the phase of your company, where they are in the life cycle, what the growth plans of the company are and whether you're public or private. Those are all really big factors to consider in how you should use AI and how much control you want around it.
I'll give an anti-FloQast pitch here. If you're a small accounting organization, let's say you have two or three people within your organization. You don't really plan on growing. Quite frankly, you might not have a need for intense documentation. You have two people who can just talk to each other in a room. It might slow you down to have a checklist and actually try to document this stuff. Presumably you don't have audit requirements, so you don't really need to think too deeply around, “what are the controls around AI?” And if it's close enough, that's good. If you can get it done faster.
So, there might be an opportunity to use some of the self-serve AI tools out there. Do a little DIY [do it yourself] software building as well with some of the offerings that are there. And in that case, I'll be totally blunt. Give the anti-FloQast pitch. You probably don't need something like FloQast to run an organization like that. But if you have plans on scaling, if you care about controls, if accuracy and control is really top of mind for you, or you ultimately plan on going public, I think that's when you need a purpose-built application like a FloQast to make sure that you scale and you scale accurately.
When AI came out, EY has deeply beaten into my brain the idea of what could go wrong. So, I'm just thinking about the “what could go wrongs.” And there were a whole lot. I mean, the number one I landed on is just accuracy and the concerns over a material weakness being found within a company using AI in an irresponsible way. So that's what I think about is a scaling organization or a larger enterprise and how they're going to do it in an audit-ready way. Thanks to my years at EY for that.

Corson

I think any of us that have spent any time in audit remember that “what could go wrong” and the WCGW acronym, to go back to your point about everything having to be acronymized. I appreciate your honesty that this doesn't apply to everybody. Where would you say the tipping point is? What level of scale and complexity does it start to make sense to make that investment in the documentation and really understanding the workflows?

Whitmire

We have found, in fact it's all made clear in our pricing, that we think six people in the accounting department is that breaking point at which you need to start documenting work. That's the point at which you have a controller managing a team, that work is decentralized and you do have the risk of institutional knowledge leaving the building. So, if someone on the team leaves, it's going to be hard to pick up that work if it's not written down, quite frankly.
Now, the need for it, I would say, depends a bit on the company strategy. At that point, if you're going to remain at that size, you might be able to get by. You might be able to not. FloQast can come in and help out with that. But if you plan on growing, which a lot of our clients start at six or so people within accounting, then they expand internationally. They add more entities. They have more currencies to deal with. Reconciliation gets harder. Inner company comes along. Consolidations. Maybe you do some M&A [mergers and acquisitions] as well. You start to grow and all those things make accounting much more complicated.
And if you're able to start with a well-documented foundation at six accounting team members and have that continue as you scale up, it's going to make your life much easier and much more efficient as you start to really grow into a larger enterprise and deal with those complications. And then ultimately, if you do choose to go public, that's where having already operated in a bit of a controlled environment for years ahead of that timeframe, makes it much easier to get SOX [Sarbanes-Oxley Act of 2022] compliant. It's less of a documentation exercise.
And then quite frankly, the big one is it's less of a culture shock to the team when you have to adhere to controls, hit deadlines and things like that. You've already softly been working in that environment. So, it's just not as big of a culture shift.
One of the roles I was brought into at my prior job was to help with getting ready to go public and a lot of the documentation around the risk and control matrix, SOX compliance, and all that. And what I was surprised to find out was, the documentation was the easy part. I mean, I worked pretty hard on it, but it was the easy part to get that written down. The culture shock that came along with it and the behavior change was the really hard part.
And, when auditors are out there, if behavior doesn't change quickly, they're going to find a control issue and it's going to blow up into a much bigger problem than that. So, having a FloQast or some tool in place before you go public, you softly get people used to working in that environment. The culture shock just isn't as extreme and you're going to have better control out the gate as a public company.

Corson

You also work with large-scale established enterprises. Is that change management and that culture shift different if you're working with an established public company? How do they embrace the technology and the benefits of what's being brought to the table?

Whitmire

You're right. We'll go into organizations where they have hundreds of people in the accounting department already. And that's a good example where generally a company of that scale, they're going to have either that situation we were discussing earlier where everyone has a little bit of their own checklist. And that’s how they get through their day job, or they probably have a documented checklist. It's just a bit manual and waste a lot of the time of the controller to keep it updated, have status update meetings, all that good stuff.
So the behavior changes generally getting them to log into an application and hit a sign off button and have some collaboration review note process going through our system. So it's all documented. So it's not as extreme, I would say as moving from an uncontrolled environment to a controlled environment, because it is a different way of working. Whereas we're coming in and helping them document the way they already work.
And so just getting them to log into FloQast, it's a pretty easy training. The product is really easy to use. Quite frankly, that's why the adoption is so high is an accountant logs into FloQast and it's built for them. They just kind of get it. You'd really don't need a training. You start signing off on stuff. We've had some funny stories of trainings in the past where people accidentally came off mute and we're talking, why am I even here? I get this kind of … kind of thing. Which on the one hand stings, on the other hand is wonderful to hear that they don't think they need the training cause they can use it. But it's not really all that difficult if you're at that early documentation phase.
Then I would say as you move into more automation capabilities and into more AI, that does require more training. And some people are just going to be bought in on it and some people aren't. And that's another really difficult one. It’s when you have maybe some stubborn personalities who don't want to do something new, it can be really hard to change that.
We try to arrive at who are the people within the department that are open to new technology and want to learn it. And those are generally the people who are most successful with that behavior change because from their perspective, it's more about the efficiency they're gonna get out of it and they're gonna like their job more than it is about having to change the way they work. They don't care as much about that. They care more about getting better.

Corson

We talked lot about some of the foundational stuff, the inputs to get right. And I think we all recognize the opportunities AI presents in terms of better collaboration, faster reporting, breaking down organizational silos. Where do you think we are on the journey of AI proving the value? Are you seeing organizations able to really demonstrate a return on the investment yet?

Whitmire

So just yesterday, we had our company QBRs [Quarterly Business Review], so our quarterly business reviews and our final topic was internal AI efficiency. We're going through it and we are taking three approaches internally to how we deploy AI. The first is our IT [information technology] department rolling out some of the more generic tooling that everyone uses on a bit of a day-to-day basis. For example, summarize your emails and things like that, sort of the low hanging baseline stuff. That's a little bit more difficult to quantify on an ROI [return on investment] basis. If you're talking to a CFO, that's a use case where you're hard pressed to be able to drive a hard ROI around automating this much work and delivering this much value. But I think we all know it's making your team more efficient and taking some of the rote work out of the equation, just harder to point to an ROI.
The second use case is we have a head of our AI team. He goes through and uses tooling to automate specific processes and workflows that our team has identified as hyper inefficient and help automate that. So, one example for us internally is we have quarterly reviews with our clients around how they're using FloQast and what opportunities are. That used to be a manual process where our account manager would spend about an hour or so digging through various systems, understanding how their customer is using it and preparing a presentation to then drive that. He went in and plugged into all those systems, is able to automatically create that PowerPoint presentation now. And so now our account managers, rather than do the one-hour exercise, they spend about five minutes reviewing it, making sure everything's good and then deliver that.
So, we have 3,500 customers. We, we strive to have a quarterly call with, with all of them. So that's 14,000 calls we're having a year, times an hour. That's 13,000 hours of savings that we've gotten from automating that one process. So easy to quantify on that one. But then my favorite use case is we have operational leaders within each group. And what they do is, they go out and pick a solution that is built for their department and they own that solution and deploy it on the behalf of their team to drive efficiency. We use a great one on our go-to-market engine and it's able to integrate with a lot of different solutions that we have. It's also able to go out in the market, understand what companies are up to and helps us generate leads and generate demand and reach out to customers way more accurately. And that's where, all of a sudden, you can point to — hey, we used to do this job with 40 people. Now we do it with 30 people because of how much efficiency we've gotten through that one area. So, I look at those are the three kinds of ways to deploy it. And there's an increasing ROI story as you move down the use cases there.

Corson

That's a really helpful articulation. I appreciate you sharing that because I think there's multiple ways to measure it, right? And you can focus very much on sort of the input side and the efficiency saving. But I think the more interesting question is: How are you actually taking that time that's freed up and how are you measuring the additional value that's being generated to that process? More time with customers, more time actually building products, whatever the right metric is. And there's an opportunity for CFOs and finance leaders to shift some of that narrative. I think a lot of the conversation has been around the input and the efficiency measurement vs. the value creation story.

Whitmire

Yeah. There are two ways to think about the value creation. You can either think about it in terms of expense savings or a growth multiplier. We like to use it as a growth multiplier here at FloQast. So, on that customer success example, from my perspective, that doesn't mean we should move on from account managers and have more clients per account manager that we're hosting and remove the ratio. Because I think that's going to result in a degraded customer experience with us. I would rather free that time up for them and allow them to be more proactive, more critical thinking and be more hands-on with the client rather than spend so much of their time on administrative work. That's awesome for our clients. That's awesome for FloQast. It's really a win-win and will help us grow faster at the end of the day. And that's what I care about.

Corson

You're a technology company. You a lot of time talking about the tech side, but where is the line? Where do you see the humans taking over in the finance organizations you're working with? What is the role of people in this process going forward and how can they, again, upskill to be ready for that?

Whitmire

This has been a bit of a squishy question even for me as well to think through. I've always kind of said, well, it'll allow accountants to focus on more of the critical work. There's going to be a human loop to really review judgment being made by AI and ensure that it's accurate and in line with what the company has to be doing. And then I'm sure you're all aware AI COSO [Committee of Sponsoring Organizations of the Treadway Commission] framework came out about how to use GenAI within finance and accounting. And looking through that, it has solidified my opinion that humans are going to become the ones reviewing the judgment of it. And in fact, extended my opinion around that.
If you're going to be the AI user within an accounting department, it's on you to understand the AI COSO framework and how the way you're using AI is then going to trigger audit procedures on the various capabilities that are being used by that AI technology. And so, it is a big shift in work and understanding really what risk is coming along with deploying AI and what do I have to do as a human to mitigate that risk and in line with adhering to the AI COSO framework. And on that note, I'm really interested.
But I think there's going to be a lot of learnings over the next several years around how we audit, how AI is being used in accounting departments. And where the work shakes out, I think is actually going to land a lot on the people using AI and then the auditors at the end of the quarter and the end of the year.

Corson

You're absolutely right. I think this question of auditability in the context of AI is going to be a very important topic over the next few years and it's going to evolve. And obviously, the pace at which technology is evolving means it's going to be very dynamic. So, I think, as a finance leader, as you're thinking about your AI strategy, thinking about that auditability question, engaging with your auditors as part of that journey is going to be absolutely critical.

Whitmire

I'll layer onto that. I think it's also ensuring that the IT department understands those requirements. Three of our larger customers have come to us and their IT department has said, hey, we want to build FloQast. We want to replace it. And we go, okay, that's a real shame. We've loved working with you in the spirit of partnership. We just want to make sure everything is being considered here and namely the compliance side of it. Just ensure SOC (System and Organization Controls) 1, SOC 2 readiness is there. You know, you're maintaining the application. So, you're always prepared for that.
You're a publicly traded company. You're going to have a Sarbanes Oxley (SOX) framework. You need to adhere to as well. It's really important to understand the risk the CFO is taking on if you're not using a SOX compliance solution. And what we found is once it understands all of that stuff, they want to go work on a different project. So, three out of three times they've gone and worked on something else because they don't want to take on the risk of blowing up the audit and the CFO very much appreciates that.
So, when I think about technology deployed here, it's really important that you have a partner who's thinking about compliance and auditability out the gate. And let's like turn agents into humans for a second. You can think about agents as staff doing work, and you can either have that decentralized or built by an IT department that doesn't fully grasp the COSO framework requirements behind it.
And you're going to end up with decentralized AI, which results in audit risk that comes along with it. And then at some point, you're going to pick your head up and want all of your agents working in a centralized location that has control around it, which is the founding story of FloQast. It's we have a bunch of people working in a decentralized way that creates risk for me. It creates accuracy concerns and we need an application like FloQast to centralize where all the people are doing their work.
That same thing is going to play out with AI. It'll be people using it independently. You'll have AI sprawl. It's going to create risk and then you're going to want to centralize it in one place, hopefully a FloQast. So why not just do that from the beginning? Build out your AI capabilities within a solution like FloQast and use our tooling and then the auditability for that.

Corson

Yeah, and I think the point you're getting at is this mental model of, as a leader, you will have a team of people, a team of agents that you need to manage. Now, I think, again, you may have different views on where on the spectrum the balance of agents versus people is, but I think when it comes back to it as a leader, you've still got to understand what you're asking people to do. You've got to understand the risk and be able as a leader to effectively manage the resources under your control. It goes back to the point you were making which is, does the leader in that situation have the main knowledge and understanding, particularly in areas like auditability, to be effective in that leadership position? But does that resonate? Is that the way you're thinking about it?

Whitmire

It does and the shift of focus that's required is more so on the back to the “What could go wrong?” and “What is the agent not doing properly?” A good comparison to make is — so I'm pretty deep, I use a lot of the AI tooling to build just fun websites and fun projects kind of on the side. Or quite frankly build modules for FloQast. And if you're a software developer using AI, a big part of what your job ultimately becomes is fixing the bugs that AI creates.
To the point where my favorite application that I use for building all this, one of their canned prompts is “check my app for bugs.” And that is an app that the AI has built itself. And it so frequently creates bugs that there's a prompt to go back and create it, which is fine for software development. It's fine if I'm building a fun little application on the side.
But if that's the main thing you have to focus on as a software engineer, which is really good at writing code, that's what it's the best at right now. If your main focus is having to fix what it broke, that idea is unacceptable in accounting. I can't have a fun little prompt that says check my financials for bugs or errors that we can't even get it to the financial statement level. And so, QA [Quality Assurance] ultimately becomes the biggest job of the accountant. Doing QA testing around the work that the agent is doing.
So, I think understanding how it's playing out in software engineering where it's most advanced right now is a good leading indicator for how it's gonna play out in accounting. It sort of supports the thesis that we've had from the beginning.

Corson

Yeah, and I think that's a conversation I've been having numerous times, that you're taking in the context of large language models, you're probabilistic, doesn't work versus deterministic in a financial reporting situation. So, as you think about, where are the right places to be deploying the right tools, anything you can you can share on that?

Whitmire

Yeah. Even within a given process, within one single given process, you're going to have a combination of deterministic and probabilistic use cases. One example I'll give you is one of our more advanced larger accounts. They're a private equity firm and they have what's called a fund allocation journal entry that they have to perform. So, we went out and we helped them do that. It started with integrating with 27 different systems that they have internally.
So now you have an ITGC [Information Technology General Controls] that comes around your integration point with all of that. We take the documentation for them, we centralize it. Then we use our product called FloQast Transform to allow them to take that data, shift it around and structure it in the way that they need to work with it. That is a very deterministic use case because we use AI to write code behind the scenes to do that work on a recurring, repeatable basis.
Transforming data is not the hardest problem out there and you can use code to do it accurately and do it quite frankly more cheaply as well. If you don't have to run a model every time, you get it done at a better cost basis. So now you have that block that is deterministic. Then, in FloQast, we create a journal entry for you. We'll populate that journal entry trail. And that is now back to an ITGC audit to make sure that the data that was created over here by the transformation product is properly populated in the journal entry.
Then we have an agent that is a first pass journal entry review agent. So, you run the agent, it goes through, it does a first pass. It looks for things like, do the debits not add up to the credits? Was this signed out? Was it not? There's really foundational things that it does. And that's in the spirit of saving the human reviewer some time before they go in. They then do their human review of the journal entry template. Make sure it's accurate. It all lines up.
So now we have an integration point, which is an ITGC [Information Technology General Controls] control. We have a deterministic part of code that needs to be tested in one way. Then we're populating the flow cast application, which needs to be tested in another way. Then you have an agent doing probabilistic work, looking at the journal entry.
Now we need to understand the judgment and the model that's being used to do that work. Then you have a human in the loop review process before it's ultimately posted into your GL [General Ledger], that journal entry. And so just that one workflow, that extracting data, booking a fund allocation and getting it into the GL, when we added it up, it hit all eight capabilities that were in the COSO framework. That is an intense audit for one process.
Now for the client, it saved them, it was about 900 hours a year that it saved them in terms of getting that work done. But now they have to do a little bit more work to ensure it's being done. So, we brought the savings down, but it also created a new form of work for them to do. And now when audit comes out, audit's gonna have to audit that process and it will be more work for the auditor at the end of the year.
So, there are trade-offs to it and that's a good example of how robust the audit documentation would need to be. And it's our responsibility at FloQast to produce that audit evidence for you so you're compliant and that's something we focus on. But just one little workflow example presents a whole lot of risk with it and requires a nuanced way of thinking about it.

Corson

I appreciate you sharing that example. I think it's a great example and just decomposing that process and looking at the different applications of AI in the various steps that process towards an ultimate outcome, I think is really helpful. And that's the level of grand narrative people need to start thinking about. AI is going to solve it. No, it's how is AI going to solve it at each step in the process and what is the right tool to be deploying? And I really appreciate you articulating that.

Whitmire

Yeah, of course.

Corson

So, as we wrap up, you're obviously CFO of a tech company. I'm sure you've got a roadmap for where you're going from a development perspective. I'm sure that's anchored to having a point of view on where you think the future of the finance organization is going. What do you think the finance organization is going to look like? And what does that mean for senior finance leaders personally to be ready? And also, what do they need to do to get their teams ready?

Whitmire

One of the cool positions we found ourselves in and I feel very grateful that we're in this position, is we do in some ways get to shape the future of how the technology is gonna work. I mean this in the humblest way possible, but we are at a good amount of scale. We have customers all across the spectrum in terms of verticals and sizes that we can work with and we can help drive how AI should be used within accounting.
And our mission at FloQast, and I think it's great for accounting, but it's also the right way to do it is we want to make sure that accountants own the future of accounting with AI. We want to make sure that this technology is in the hands of accountants. We think that will result in the most efficient work and the most accurate work being done and allow for the most thoughtfulness to be deployed across to AI. The other option is allowing IT to do everything. And if IT is going out and deploying AI, you're going to miss the accounting nuances. It's going to insert risk into the equation. And I don't want that to happen.
So, what we're doing at FloQast is we're building software to empower accountants to own that work, which means it's incumbent upon us to make sure it's really easy to use. It's easy to learn. And we think that with all of that, it is going to create a new role in accounting. So, you'll have your … I talk about there really being three roles within the future of accounting. There's still going to be humans.
You're going to have your controller. Their job is going to be to manage people, manage the whole process, make sure everything's on track. And that is great for certain personalities. They love managing people personally, despite running a large organization. That's not my favorite thing in the world. I hire great people who do a lot of the people management around here. But some people enjoy it. And so that will be one of the roles in the future.
The second is going to be, still that technical gap accounting expert who understands regulation, understands gap, accounting guidance, all that good stuff. And they're the ones who are there to make sure that new work is being interpreted properly and done properly. You know, ASC [Accounting Standards Codification] 606 comes out, someone needs to do that work and get it in place and make sure it's deployed across the org.
That role will still exist. And then the third is going to be more of a technologist-looking role. And so that's the person who, self-serving here, but we want that person to own FloQast. They're going to be the ones who are really owning all the agents, building them, deploying them and managing them in conjunction with the regulation expert, doing that work together to make sure that all the work is done in a compliant manner.
It's going to look much more like a technologist. And the reality is the role is probably those who are financial transformation experts today. That's a bit of the morph in their job is to really, really driving more of the technology and the adoption — not just collaborating with IT, but more so owning it to drive that transformation. And we've put out a program we call it the FloQast Certified Accountant.
And the idea is to educate accountants to be that type of new role and be successful within the accounting industry. So, if I'm a CFO, what's really important right now is identifying the people and the talent that are good at this naturally and want to do more of the tech-focused work. That's it. Everything starts with people. It starts with people, and then process, and then technology. It's an old trope, but it is for a reason. It's very accurate. And so, step one is identifying the right people within your organization to take on those three different roles. Make sure your process is documented and then talk about “how do we deploy technology more aggressively against that?”

Corson

Fantastic. Well, that's a great way to finish. As we close out, we'd like to have some rapid-fire questions so we can learn from you as a leader and share some of that wisdom that you've accumulated over the years. Is there a particular all-time favorite quote you have and why does that standout for you?

Whitmire

It's very basic. People don't love it around FloQast, but I'll say hard things are hard. We're trying to do hard things here at FloQast. And that means that every day is gonna be hard. It's not gonna be easy. And so just kind of get used to it is one of them. It has mixed reception, but it kind of is what it is. So, I talk about that one. And then there's debate of who this quote is attributed to or not. But I believe it was Ford.
It was, if I asked the customers what they wanted, they would have said a faster horse. And I agree with that. So, then I talk about, OK, that quote should be applied to different life cycles within product development. I think it is very much our job at FloQast to innovate and be the zero to one. The person who has the idea for the car, not the faster horse. But then once you've invented the car, work very closely with your customers on how to make that car as good as possible for them.
I'm not necessarily the guy who's going to have the idea around putting air conditioning in a car, but if someone's driving in a car all day and they get really hot, they might be like, “can I have this thing that makes it colder in here?” And we'll be like, “yeah, we'll go do that for you. We'll build that. Oh, you want to listen to music in your car? Cool. We'll go put a radio in for you.” Like things like that. You need to work closely with your customers to build out the product such that it's really great for them and it creates a great user experience. But it's our job to innovate and get from that zero to one phase and really try to be forward thinking around how accountants should work in the future. The faster horse quote is one I like delivering as well.

Corson

I love that. I think you're right. It's Henry Ford. It's the Model T example. But I think the point you made around understand where you are, are you driving the disruption or are driving the continuous improvement and making sure your organization is aligned effectively where you are in that stage? That's great. I love the zero to one. That's fantastic. Was there a particular piece of advice that someone's given you during the course of your career that has had the most impact?

Whitmire

I have a mentor, one of our first board members at FloQast. And I remember early on talking to him about, we had a really difficult conversation. I had to close an office down and that meant we had to let go of about 25 people at FloQast. It was a really tough decision to make. It was at the end of the day, what was best for FloQast. And I remember talking to him like, how do you deliver this message to the company? What's the right way to do it? And he just said to me, “Hey man, the truth shall set you free.”
That's it. The more open and honest you are and transparent about the decision. Like at the end of the day, what you're doing is right for the business and just explain your logic, explain why and be open and honest about it. And people will respect it and appreciate it. And the true sell shall set you free as a leader, I think is an insanely great piece of advice. And it's something that I try to carry through with everything I do to the company. That one means a lot for me and has driven a lot of my leadership style.

Corson

One of the pieces I go back to is bad news doesn't age. I think it's a similar theme, right? I mean, just get it out there and deal with it. You will be much more constructive rather than procrastinating on stuff that's great. And then, obviously you're an entrepreneur, you've got this rapid growth company, you've got a lot of pressures on your time. How do you maintain well-being and balance?

Whitmire

I think it's important to have hobbies outside of work for sure. I do, I fit some of the stereotypes of accountants. I love golf and I love baseball. So, I do get out and golf. If you can see behind me, I do have a golf simulator. I'm fortunate enough to have that at home. So, I get to do some of the golfing without spending a ton of time away from my family, which is also really important. I think having family time, focusing on your family.
I have an eight-year-old daughter. I don't want to miss her growing up. And so being able to carve out time to do that is something you have to do intentionally, but I think it's important to create a balance in your life. So yes, I spend a lot of time on FloQast. It takes a lot of my head space up, but I also need to have free time to do things outside of work. And that's to me hobbies and family. And I think that makes me be better at FloQast as well.

Corson

Fantastic. I fully agree with that. I'm lucky to be able to blend both. I got my kids playing golf early and they love it. So, I too.

Whitmire

Awesome. That's awesome. Yeah, my daughter just playing softball. Just started playing softball. It's a lot of fun. A lot of fun to go to the games and watch them learn and have fun.

Corson

We'll get ahead with the golf swing sooner rather than later because that softball swing doesn't help the golf swing.

Whitmire

Nah, the earlier you start golfing, the better for sure.

Corson

Fantastic, it always be a great conversation. Really enjoyed talking to you and thanks for being on the show.

Whitmire

Yeah, likewise, Myles, thank you so much for having me. This is really, really cool. Being an EY alumni to this interview. It's been a lot of fun. Thank you, you too.

Corson

Take care.

Whitmire:

You too.

Corson

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You’ll find related links at ey.com/betterfinance. As always, thank you for listening.
END

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Myles Corson

EY Global Financial Accounting Advisory Services, Strategy and Markets Leader

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Season 9, Episode 1

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