Learn how AI and intelligent process automation are redefining financial processes, enhancing efficiency, and helping finance leaders navigating economic challenges.
In this CXOTalk conversation, we explore intelligent automation in finance and how AI and ML can improve modern financial processes. The discussion was recorded live at Workday Rising in San Francisco, between analyst Michael Krigsman and John Hugo, VP of Financial Products & Go To Market at Workday.
Important highlights from the conversation include:
- Digital Transformation in Financial Processes: Insights into how digital transformation is reshaping financial processes, helping companies navigate economic changes and evolving business models.
- Intelligent Automation and Operational Efficiency: Examination of the impact of intelligent process automation and AI on cost management, staffing, and compliance in finance.
- Adoption of AI Process Automation: Discussion of the cultural shift towards data-driven decision-making, emphasizing the role of automation tools in leveraging real-time data and predictive analytics.
John Hugo joined Workday, Inc. as Vice President, Financials Products and Go To Market in 2015. Prior to Workday, John was Senior Vice President & Corporate Controller, and Principal Accounting Officer, at Life Time Fitness, Inc., a Minneapolis, Minnesota based Healthy Way of Life company. Prior to Life Time Fitness, John held accounting and financial leadership roles with CompleTel Europe, N.V. (Paris, France), Jones Intercable, Inc. (Denver, Colorado), and started his career at Arthur Andersen LLP (Denver, Colorado).
Michael Krigsman is an industry analyst and publisher of CXOTalk. For three decades, he has advised enterprise technology companies on market messaging and positioning strategy. He has written over 1,000 blogs on leadership and digital transformation and created almost 1,000 video interviews with the world’s top business leaders on these topics. His work has been referenced in the media over 1,000 times and in over 50 books. He has presented and moderated panels at numerous industry events around the world.
Table of Contents
Michael Krigsman: We're discussing how business leaders can drive efficiency and cost savings in this challenging economic environment. I'm joined by John Hugo, Vice-President of Financials Products and Go To Market for Retail and Hospitality at Workday. John has been with Workday for eight years and is a finance pro in his own right.
John Hugo: I spent 25 years in accounting and finance. I was at Arthur Anderson for a few years (back in the day when they existed) and then 10 years in cable and telecom. Then the last ten years (before I came over to Workday) I was the SVP and CAO at Lifetime Fitness.
I took Lifetime public in 2004. Then, soon after that, we were introduced to Workday and became Workday customer 12. With eight years as an employee and eight years as a customer, I've been involved with Workday quite a long time.
Michael Krigsman: John, you're in touch with finance leaders all the time.
John Hugo: Mm-hmm.
Michael Krigsman: What are the challenging or the most pressing issues today that they're telling you about?
John Hugo: If you asked me that question a few years ago, I would have said, "Digital transformation; it's the big thing." It still is, but I think, back then, it was newer, and now it's expected.
What I'm hearing now, Michael, is, "Get back to the basics." I'm a CPA. I'm an accountant. Cost efficiencies, cost savings: those are the things that are resonating right now. I think, with the economy where it's at, that's very important.
Michael Krigsman: What about disruption, new business models, competitors that are driving new ways of relating to customers, and new ways of driving profit and revenue?
John Hugo: I focus on retail and hospitality. Retail, during the pandemic, survived because a lot of them already had online ordering capabilities. But the hospitality side where it's service-oriented really took a hit.
What I saw during that time was the companies that had a more mature curve on where they were with technology took advantage of things like restaurants having mobile in place already and curbside drop-off and delivery. Those companies in the hospitality space really got ahead.
Michael Krigsman: But the real issue ends up being... Correct me if I'm wrong.
John Hugo: Mm-hmm.
Michael Krigsman: How to drive revenue—
John Hugo: Yeah.
Michael Krigsman: –and profitability in an environment that is very challenging economically for a lot of companies.
John Hugo: I agree 100%, Michael. I think the one thing that makes a difference in the companies that are succeeding is having information in real-time: real-time financial data, real-time human capital data, even operational information, and point-of-sale systems. If the companies are getting that immediately, they're able to have more of a predictive type of business instead of a historical business.
Michael Krigsman: What about companies, especially in services, where the revenue cost, labor can account for half of their overall cost?
John Hugo: Right. When you look at the P&L of almost any company, it is 50% to 60% of the cost. What I'm seeing there is that's where technology really can kick in.
If you can start having demand forecasting and scheduling, everything is based on real-time information that's feeding scheduling. So, labor truly can be controlled by the company. What used to be kind of a loose scheduling is now really tight, and you can get information into the hands of the operators much quicker, too.
Michael Krigsman: But John, existing technology systems should help with this.
John Hugo: Mm-hmm.
Michael Krigsman: That's the reason these systems exist.
John Hugo: Right. Right.
Michael Krigsman: What's actually going on? What is the obstacle, the impediment, or the challenge?
John Hugo: It boils down to one thing for me, and that's speed: speed of information, speed of data.
I'll give an example. In the accounting world, I will be talking to a CFO or a controller, and I say that it's really important that you get information quicker.
They say, "Well, I put my information in a batch at 7 o'clock when my team leaves. Then at 8 o'clock in the morning, I get the consolidated numbers."
They go through that batch processing and they think that's fast. That's not fast anymore.
Fast is truly real-time, nanoseconds. Having information fed to not only the accounting group but also to the operational team, that's really important.
Michael Krigsman: John, can technology help with issues such as volatile costs or fluctuating staffing?
John Hugo: You're going to hear me say this about five more times, Michael, the term "predictive"; the more information you can get.
At Workday, we have 65 million users and 600 billion transactions. We're generating so much information that now commodity prices, payroll expenses, almost anything you see on the P&L, can be predicted.
Maybe not accurately. There's always going to be disruptions. But I think it's really important that we're headed that way.
Michael Krigsman: The technology, especially AI and ML—
John Hugo: Mm-hmm. Mm-hmm.
Michael Krigsman: –can help predict the impact of fluctuating costs on your business.
John Hugo: Right. Right. AI, ML: they've been around a long time. Obviously, ChatGPT kicked off the world (knowing what it was about).
But it really gets into this, and this is my next time saying predictive. My whole career, I worked for public companies. I audited public companies. It was always spent looking backwards, so monthly close, quarterly reporting, yearend reporting. We were always taking information from the past.
Now, I think we're getting to the point where we can almost have a continuous close cycle where that information is coming to you on a real-time basis, and you're squeezing all of that time that used to be spent preparing information from the past into looking at it more analytically and looking to the future.
Michael Krigsman: Automation can help reduce that closing cycle time.
John Hugo: Even at my old company, Lifetime, we went from around a ten-day monthly close. Just think, you've got 60 accountants closing the books for 10 days. That was shrunk down to two or three days.
And even now, we like to use the term continuous close. So, instead of these ten-day chunks or five-day chunks every month of the year, now you're doing a close during the period. So, when it comes time to close the books (like accountants love to do), it's almost done for you by the time that period comes.
Michael Krigsman: What about compliance and auditing? That's obviously another very, very important topic.
John Hugo: One of the reasons I purchased Workday at Lifetime was the auditability of the systems. We had date stamp, time stamp, people stamp, on every single transaction, so you can't undo the system. That's inherently built into Workday so that compliance and control is super tight.
The other thing as far as regulatory goes is we have two semiannual updates. They're almost behind the scenes. But within those updates (not only from an accounting standpoint but regulatory standpoint), our team knows that revenue recognition was a big one a few years back – lease accounting. We build that into the system so when it becomes effective, then that's already available to the customers.
Having that built-in regulatory, accounting, and GAAP and FASB (all those good acronyms) in the system makes a difference, too.
Michael Krigsman: What about the impact of technology on forecasting and budgeting? Again, these are such fundamental aspects—
John Hugo: [Laughter] Yeah.
Michael Krigsman: –of operating any business.
John Hugo: There are still a lot of Excel-based annual budget cycles, and it drives me nuts. Even 10 or 15 years ago, we talked about rolling forecasts. So, instead of having information once a year and then, two months in, you're already off-budget, we build quarterly rolling budgets.
But even that's slow now, so if you're plan is supplemented and all your drivers in your plan are supplemented by actual, real-time information, then your budget is real-time all the time, and you can make shifts and make your company more agile having that information real-time.
I think the budget and planning process of the past should be going away. Now we're – here we go again – real-time, predictive planning as well.
Michael Krigsman: Having that real-time data, could we say that that's really the competitive edge when it comes to this set of issues?
John Hugo: I think so. The other thing I like to do is engage the operational team, the frontline workers (especially in retail and hospitality). Having information to them in real-time to them as well.
Too many times I also see information compiled by finance then handed off to operations, and you're already two or three days into the week. So, why can't that information be available in real time? It makes a difference and that allows the operational employees to spend less time behind their computer, more time out generating revenue with the customers.
Michael Krigsman: John, given everything we've discussed, what advice do you have for business leaders on incorporating these kinds of lessons?
John Hugo: Mm-hmm.
Michael Krigsman: The technology and just the culture of relying on data to make their business more efficient.
John Hugo: You have silos within an organization. You shouldn't but you do. You have HR. You have operations. You have finance.
But also, you have front office, middle office, back office. We like to think that if you have the right technology that enables the front office, middle office, back office to all be one, sharing.
I know democratization of data is kind of overused but it's true. Having access to information in real-time and having the tools that allow you to do that is what makes the difference.
Michael Krigsman: What about the cultural dimension of getting folks inside the organization comfortable with this idea of being data-focused?
John Hugo: The younger employee base that we're seeing now, they embrace technology, they embrace data, and if you're not heading that way, they kind of ask why aren't you. I think it's a really nice recruiting tool as well.
That culture is shifting, and the adoption of it all is real-time, too, with the employees that we have right now. That's expected.
Michael Krigsman: Where do you see this automation going?
John Hugo: AI, ML, generative AI: it's where everything is going. It supports my thought on being a predictive culture.
Companies need to get past looking backwards and get to looking forwards. I think that makes a successful organization.
Michael Krigsman: I love that, the idea of a predictive culture looking forward rather than just looking backward.
John Hugo: Right. Yep, absolutely.
Michael Krigsman: John, thank you so much.
Published Date: Nov 14, 2023
Author: Michael Krigsman
Episode ID: 813