Plus: CFOs Say AI Will Make Finance Departments More Efficient |
| Finance departments are finally getting the technology they need and plan to use it to work efficiently—and will likely need fewer people in the process, according to a new survey from Datarails. Spending on the CFO tech stack is increasing—making them no longer a neglected “Cinderella” department, the study found—with 70% set to invest in AI technology in 2025. More than half say they expect to need fewer people by 2026 when AI use is entrenched. There are plans to use AI throughout the financial sector, although there’s no majority consensus on any one function or task. More than a quarter say financial reporting is the most ripe for AI disruption, but 22% say analytics has that distinction, and 21% say it’s risk assessment. Regardless of how they want to use AI, nearly three in five CFOs at finance, banking and insurance companies say there will be a drop in roles due to AI adoption. A total of 57% of software CFOs are predicting an AI-lowered headcount. But 27% say that it will not impact the number of roles available. Many analysts say that while generative AI can help companies do more, it shouldn’t be replacing actual human employees. But considering the current state of the financial department, this might mean that companies may be able to continue to function at their current levels in the future. The number of accountants is dwindling, with fewer people pursuing accounting college degrees and the CPA career path—the number of bachelor’s degree graduates dipped by 7.8% between 2020-21 and 2021-22, and 6.4% fewer master’s degrees were conferred in the same time period, according to the American Institute of CPAs. And while good financial talent is getting harder to find, AI may be able to fill in some of the gaps. Using more AI may even have the net effect of bringing more people to the financial profession, which Even without AI, technology has led to big changes in CFOs’ jobs—both with what they are expected to do and what they are able to do. I talked to EY Global Finance Transformation Leader Deirdre Ryan about how technology is making CFOs need to be more forward thinking. An excerpt from our conversation is later in this newsletter.
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| In today’s CFO newsletter: |
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| After the votes were tallied and it was clear that Donald Trump would be the next president, the markets took off. But at the end of the last week, investors hit the brakes. Several things happened to cool the rally. Federal Reserve Chairman Jerome Powell said in a speech last Thursday that there are no economic signals that interest rates need to be immediately cut any further. Meanwhile, after Trump announced he would nominate vaccine skeptic Robert F. Kennedy Jr. as Health and Human Services secretary, stocks of vaccine makers Novavax, BioNTech and Moderna dropped 5% or more. Tesla, whose stock has been booming in large part because of CEO Elon Musk’s close alliance with Trump, fell into correction mode last week on reports that the president-elect would kill a tax credit for EV purchasers—though it saw a 5.6% rise Monday based on a Bloomberg report that a federal framework for self-driving vehicles was an administration priority. “Trump’s recent unorthodox cabinet picks,” combined with the dollar’s rise to a 12-month high and the benchmark 10-year U.S. Treasury yields climbed from 4.29% to 4.41% following the election, “is causing investors to re-assess the potential impacts of the incoming Republican government,” wrote Sevens Report founder Tom Essaye in a Friday note to clients. However, analysts are bullish on the markets for the long term. Both Goldman Sachs and Morgan Stanley predicted the S&P 500 would hit an all-time high of 6,500 by the end of 2025, based on projected earnings growth and interest rate cuts. The S&P closed at 5,893.62 on Monday. October inflation was up for the first time since March, according to Bureau of Labor Statistics data released last week, with consumer prices 2.6% higher in October than a year before. Core inflation, excluding more volatile food and energy costs, saw a 3.3% increase. And while these numbers are progress for economists, consumer prices have not fallen as quickly as inflation rates, and people still feel the impact of high inflation. Many people who have analyzed the presidential election have said voters’ personal experiences with inflation were a key driver of Trump’s victory. |
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| While President-elect Donald Trump has quickly been naming his picks to Cabinet-level positions—some controversial and others widely expected—one key nominee has not been announced: Treasury secretary. Reports indicate a three-way race between hedge fund manager Scott Bessent, Wall Street billionaire Marc Rowan and former Federal Reserve governor Kevin Warsh. Cantor Fitzgerald CEO Howard Lutnick had been in the running, but reports indicate Trump wants to nominate him for Commerce secretary. The New York Times reported that Trump said he wants someone “big” for the job, and places a high value on wealth and respect from Wall Street. Considering that many of his campaign trail policies centered on the economy—tax cuts, tariffs, ending inflation—the policies enacted by this member of his Cabinet could be among the most important. There’s been no indication when this nominee will be named, though reports indicate the leading candidates are working to showcase their plans—and loyalty—to Trump. |
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| A federal judge last week rejected President Joe Biden’s rule increasing the maximum employee salary that requires employers to pay an overtime premium. The rule, which took effect in July, increased the salary cap from $35,500 to $44,000. The next increase, which was slated to go into effect next year, would have raised the cap to nearly $59,000. And it also mandated that beginning on July 1, 2027, the maximum salary receiving overtime would automatically increase every three years. The new rule would have expanded overtime pay to 4 million workers. U.S. District Judge Sean Jordan struck it down because it is based on salary, not job duties, which Jordan said also needs to be considered when determining if a salaried employee is eligible for overtime. A similar attempt to increase the maximum salary for receiving overtime issued at the tail end of the Obama administration was struck down in 2017. |
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| | | EY’s Deirdre Ryan On How Technology Is Transforming The CFO’s Role |
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| The CFO’s role has been in flux, transitioning from someone who solely worked with numbers to increasingly becoming a leader in strategy. I talked with Deirdre Ryan, EY Global Finance Transformation leader, about the reasons behind these changes, the new challenges CFOs today face, and what the future likely holds for the position. This conversation has been edited for length, clarity and continuity. What do you think has caused the biggest change to the CFO’s traditional role? Ryan: The advance of technology has allowed them to focus in an area that ultimately better supports the goal of their enterprise. Before, so much time was spent processing transactions. That was the bulk of the effort, not just for the CFO, but the entire finance organization. Most finance organizations, they probably spent 60% to 80% of their time ingesting and processing transactions so that they could produce accurate financial statements. Now with digital technologies, most organizations have leveraged that capability to automate, and it’s allowed them to shift their focus to more value-added activities. We have a point of view that we put together about a year ago. I brought together some of our best global thought leaders. I wanted to very practically say: What is a finance function going to look like three to five years out? There’s just so much change and disruption, and a lot of [CFOs] needed to better understand. What do I need to look like three years from now, five years from now to either gain or maintain a competitive advantage? A lot of that is about automation and leveraging those technologies so that you can pivot your team to really drive value for the enterprise. One of the major challenges is not just learning how to use this technology, but ensuring that the data is clean and can be processed effectively by the system. What are some of the other big challenges CFOs today are facing? The CFO role is evolving, but they’re in this position right now where they have to balance these traditional mandates: Basically we need our CPAs, we need our MBAs, we have to get the numbers right, we have to figure out the “so what” of the data. It’s balancing the traditional mandates and what historically has been expected of a CFO with bold transformation and being able to help her or his organization envision the art of the possible. Historically, when we wanted to drive improvement in finance, typically we would look at an end-to-end process and say: How can we make this more efficient? We could make a little tweak here, put a Band-Aid here, put some bubble gum here. We could drive some efficiency. But now what we’re saying is: Let’s take a step back and think about this differently. Let’s think about the data, as opposed to the process. That’s really going to drive value. Let’s take FP&A. Historically, organizations could have looked at that end-to-end process and said: I’m going to tweak this. I’m going to fix that. But now, given these technologies that we have, you really have to completely reimagine how you’re running that department. It’s such an exciting time, but it takes skill sets that finance professionals didn’t need to lean on so heavily before. That takes a really good understanding of the capabilities of these tools and technologies. Not just reading an article or PowerPoint, but getting your hands dirty and really understanding. It also takes creativity to step back and say: How do I do this in a way that’s effective, efficient, but leveraging these technologies, changing my mindset and opening my mind to the art of the possible? How do you see the CFO's role continuing to evolve in the next five to 10 years? Organizations that have put focus on driving transformation, hopefully they’ll have automated 80% of their transaction processing. CFOs are going to continue to understand and have in-house automation experts. You’re not going to completely eliminate human intervention because you want constant process improvement, but if that’s done, their role is going to continue to evolve towards driving value. Bottom line, we think that the role of a CFO is going to be a data centric function focused on driving value. If you’ve automated capturing data, you have to take advantage of that to drive value. |
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| Chip maker AMD announced job cuts last week as it works toward becoming a more dominant player in AI hardware. |
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4% | Proportion of employees AMD is cutting, which works out to about 1,000 | |
| 18% | Overall year-over-year increase in AMD’s revenue in its most recent quarterly report. However, its gaming segment was down 69% compared to last year | |
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