Adapting to AI in Accounting | Count Me In Podcast

Welcome to the Count Me In podcast with your host Adam Larson and special guest Dan DeGolier! In this episode, Adam and Dan, founder and CEO of Ascent CFO Solutions, dive into the fascinating world of AI and its application in the finance and accounting sectors. Discover how AI is enhancing efficiency and reducing errors, while also exploring the potential challenges and ethical considerations it presents. Join us as we explore the evolving landscape of AI in fractional leadership. Tune in now for an engaging discussion you won’t want to miss!

Transcript

Adam Larson (00:05)

Welcome back for another exciting episode of Count Me In. I’m your host, Adam Larson, and today we have a special guest joining us, Dan DeGolier, the founder and CEO of Ascent CFO Solutions. We start off by exploring current use cases of AI in the industry, such as coding transactions and streamlining forecasting processes. But as Dan points out, we’re only scratching the surface of what AI can do. The potential for growth and efficiency is immense, but it’s important to proceed with caution.

and be aware of the biases and ethical considerations that come along with it. Throughout this episode, we highlight the evolving role of finance and accounting professionals in the age of AI and how they can adapt to leverage its benefits. From bookkeepers to CFOs to fractional CFOs, AI has the power to enhance efficiency and transform the way we approach financial management. So grab your headphones and join us as we uncover the exciting world of AI and accounting. Let’s dive in.

Well, Dan, we’re so excited to have you on the podcast today as we’re going to talk about AI and fractional leadership. And just to get started, as we think about AI, how is it currently being applied to finance and accounting sectors? And how does it, you know, it obviously does things like enhance efficiency and reduce errors, but how is it being applied in those areas?

Dan DeGolier (01:24)

Thanks. Thanks for having me on Adam. It’s a pleasure to meet you. Pleasure to be here. I think we’re just getting started for one thing. know, AI is even though it’s been around for a while, chat, GPT, GBT four and all those things are relatively new to the mainstream. And so I think a lot of this stuff we’re just starting to figure out right now, or definitely in the accounting side, we’re starting to see some use cases for coding transactions and things like that. I think there’s a lot of opportunities in our world in the sort of finance.

realm when it comes to forecasting to be able to streamline multiple scenarios and make iterations to financial models and forecasts. think that’s an area that is we’re starting to see develop. then things like pricing strategy and looking at different ways to price and run different scenarios around that using, you know, large language models to, and data and being able to bring in data and run multiple scenarios and see what things look like there. think those are all some areas that we’re starting to see, but

Honestly, I think because it’s so early, we’re going to, what is really going to be the biggest use cases two years from now is probably something we haven’t thought of or somebody’s thought of, hasn’t really been implemented yet.

Adam Larson (02:35)

Yeah, I think that’s a big, that’s a great point that we’re so early in the generative AI phase that some organizations are adapting quickly, other ones aren’t and software companies are trying to integrate it into there, but it’s still in the early phases. our traditional role. Well, exactly.

Dan DeGolier (02:48)

It’s still prone to errors as well.

Yeah, it’s, it’s, we’ve all, we’ve all read, you know, the articles about, about the lawyer or try to use it for briefs and got in huge trouble and, the, you know, the hallucinations are still rampant. I think proceed with caution, but recognize that it has enormous potential and don’t be left behind. You know, I’ve, I’ve heard, I was going to say, I’ve heard that it’s been compared to, if you look at web 1.0, you know, the emergence of the internet and, court and commercial use.

This could be a 10x type of opportunity from a growth potential, from an efficiency potential, et cetera. It’s just fascinating to me where just how massive this could be and how life changing this is.

Adam Larson (03:32)

Also the bias that’s implicit in there in the AI, because there’s so many biases among how people think, wording that’s out there on internet and how it’s learning, there’s gonna be that bias that you have to get over as well because it’s gonna be embedded in there because of how it is societally.

Dan DeGolier (03:47)

Yeah, I agree with that. think one other ethical consideration that needs to be taken into account when you’re implementing AI is things around copyright infringement and intellectual property and protection there. think the chat bots aren’t necessarily aware of what’s IP and protected and what’s not. And so I think it’s important that we take into that there’s a human overseeing that and making sure that

There’s nothing being taken out of context and are being utilized improperly and along the same lines. Research is another area of tax research and other types of accounting research, I think is a place where there is a lot of use cases for AI. But again, this is where you have to be very careful around the, you need to be very careful around trusting that research and being validating that it is accurate so we don’t end up in a situation where

or where something that’s not valid is being utilized.

Adam Larson (04:45)

It’s going to be very difficult to understand what has been verified and what hasn’t. And as you’re doing research and as you’re looking at things online, there’s going to, I imagine new tools are going have to be developed to verify, yes, this is valid and or no, it’s not. And how do you trust those as you go forward? Yeah.

Dan DeGolier (05:02)

No, that’s really important that there’s a, and there’s going be mistakes made as we started to adopt this. We’re going to see, we’re going to see mistakes being made. And ⁓ as humans, we need to learn from our mistakes and learn from others mistakes. That’s how, that’s how we evolve.

Adam Larson (05:18)

Do you think that the traditional roles in finance and accounting are going to change because of these? mean, obviously they are, but like, how can we adapt as we go forward?

Dan DeGolier (05:26)

Yeah, I think first thing I would, I would suggest is, is pay attention. So what’s going on, see what’s evolving, see where things are taking it. I think it’s going to definitely change the accounting side, you know, the, day to day transactional stuff. There’s a, there’s a YouTuber out there, Hector Garcia, who has done some demos of how you can plug in a chat GPT sort of tool into QuickBooks online and how, how that can be help ease the coding and of transactions and things like that. So I think.

I think it’s definitely going to change that sort of bookkeeper and sort of junior accountant sort of role significantly. I think it’ll change all aspects of, think it’ll, the CFO’s desk, I think it’s going to still require somebody with experience and knowledge and understanding to validate what’s coming out of it and to, just like any other industry, I think there’s a lot of need to confirm and double check and be heavily involved at that sort of strategic level.

But I think it’s going to make things, I think it’ll make us more efficient.

Adam Larson (06:27)

Yeah, I definitely agree with that. And as you’re talking about things like analysis and looking at it from that higher level, the, I mean, obviously the AI has a better computing power, but we still need that human element. And how does that traditional human analysis going to affect as we look at the output from the AI?

Dan DeGolier (06:45)

Yeah, I think that it’s still going to be critical. think machines are going to do a lot of the analysis and it’ll find pattern. It’s better at pattern recognition than us, especially with large data sets. But I think when it comes back to that human element of truly understanding and the sort of uniqueness of certain things, it’s still going to require a human element. was thinking about, in preparation for this call, was thinking a lot about sort of fraud detection and…

Adam Larson (06:55)

That’s it.

Dan DeGolier (07:12)

You know, you’ve got large data sets out there. think, again, back to pattern recognition, think AI can be really good at identifying things that stand out and look unusual. You think about maybe ⁓ purchase orders or sales orders that look unusual, maybe have overrides from managers and they can look for patterns there where particular users within an accounting system or ERP system might see that something that a particular, you know, manager might tend to override things more often or looking at

looking at addresses and zip codes and understanding that there might be some inappropriate payments made that match up to addresses, know, vendors that match up to, you know, employee addresses or things like that. So that could be, it could be bogus. That could be fraudulent. I think those sort of things are going to be a huge area for, for auditors and both internal and external auditors starting to use those sort of data sets where we can, that, ⁓ that

AI tool can go in and start digging around and finding some unusual patterns.

Adam Larson (08:12)

Yeah. So in thinking about implementing AI within your organization, like if you’re really considering this, you’ve done all the research, what are some challenges or ethical considerations that should be addressed when implementing it?

Dan DeGolier (08:24)

First thing that comes to mind is security. Right now, I’ve heard, I’ve been reading some things that we’re trying to be able to bring it inside your intranet, bring in those sort of tools inside your intranet, but you don’t want to have breaches of data, things that go out where the chat bot is getting ahold of your corporate data and then utilizing that in the integrator universe. And so I think that’s going to be really critical is that we solve for…

security concerns where things stay within the four walls very clearly. That’s the first thing that comes to mind. think the other one is touched on earlier, which is it’s trusting it too much and seeing that something that comes out of it is just trustworthy as opposed to it’s really validating it. Whether that’s research around case law when it comes to tax law or whether it has to do with just what comes out of a financial model and what’s practical from a pipeline perspective.

and things like that when you’re forecasting your financials.

Adam Larson (09:24)

Yeah. So as we look to the future when it comes to AI, what are some of the breakthroughs that you think will happen within the finance and accounting industry as we look to the future with AI? ⁓

Dan DeGolier (09:35)

Automation in general, and that can take multiple forms. We touched on the accounting coding of transactions and things like that. I think that’s a big part of it. I think there can be a lot, a lot more automation around all of the accounting cycles, whether it be payroll, invoicing, accounts payable. I think there can be a tremendous amount of automation on that side. Variance analysis when it comes to, you know, your, your, your soft close to the books, your initial review of, of a month end close. I think there can definitely be a

you know, analysis and digging a transaction and seeing if it’s thing looking for those, those variances to, to prior periods, variances to budget variance to forecast and kind of pulling those out. So I think there can be some automation around that. And then again, on the financial modeling piece, the forecast piece, I think there can, there will be automation there as well.

Adam Larson (10:25)

So one area of expertise that you have a lot of expertise in is the fractional leadership, the fractional executive, and especially the fractional CFO. And as we’re talking about AI and the changing of how that CFO looks, how do you see that the ability to have that, do this AI as a fractional CFO, how does that really enhance your ability to help the organizations that you’re with in that fractional capacity?

Dan DeGolier (10:52)

Yeah. Well, at our firm, we’re technology first and we really try, we’ve always been focused on automation wherever we can. So I think for us, it’s going to be those same types of approaches where we find ways to be more efficient, to be more cost effective, to really implement these tools, identify the best use cases for these tools.

you know, kind of trust would verify, you know, make sure that you still got that, that adult supervision, ⁓ with that, AI tool, but you know, really leaning into it and making it a, a tool that, that makes that, that speeds up data for, for the C-suite. I think it’s really, you know, the faster, the faster you can close your books, the faster you can update your model, the faster you can make adjustments. When you see something change with your pipeline, I think more agile, a executive team can act.

Adam Larson (11:44)

So when you’re coming in as a fractional executive, a lot of times that the best place for that model is an organization in transition, right? And so that’s what I’ve been reading when I’ve had other conversations. It seems like it’s organization that’s in transition. When you’re in that transition, it seems like you would be looking at all your systems. But how do you come in and say, hey, I want to have this technology first and utilize these tools, but they have never used those before. How do you bridge that gap?

Dan DeGolier (12:11)

Yeah, it’s an incremental process, right? mean, when we look at working with the company, it’s, they are often going through a transition. They’d be there, you know, they’re looking to raise an additional round of capital. They’ve recently raised another round of capital. They’ve got a new board record, requirements. They have a, they need better discipline when it comes to forecasting their cashflow. So we’re often, yeah, if they’re a little behind the eight ball, when it comes to technology, we’re going to.

It’s going to be incremental steps, right? You first have to get a really solid ERP or accounting system in place that is trustworthy and fully GAP. Whether they’re audit or not, you want them to be fully on a cruel GAP basis. And then once you have that, then you start to put in place those data visualization tools. That’s something we’ve been leaning into really heavily the last year or two is creating really robust dashboards and data visualization that not only show your

historical financials, but your forecast and your HR and your payroll and your sales pipeline. And so I think those sort of technologies first need to have really reliable actuals before you can lean heavily into some of the other newer technologies and more robust technologies.

Adam Larson (13:27)

That makes me think of how important it is to have good data because you don’t want to have garbage in and it’ll just be garbage out. So you have to really make sure your data is in a good spot.

Dan DeGolier (13:36)

You don’t even want to start to forecast or implement those, those, uh, better tools until your historicals are accurate for sure. And it’s not just, just not just plain gap, you know, financials. It’s also the, what’s your KPIs look like? What are the real drivers of your business? And that’s, that’s one of the things we look at when we come into a new client is, is really take the time to, to look at the, at the true drivers of the business. They may not be obvious at first. Every company is a little bit different with striving there.

their growth and their revenue and the cashflow. So we’re really, we really lean into that as a start. often start with what we call an assessment phase. We’ll spend 20 to 40 hours just really digging in deep to understand every component of the business.

Adam Larson (14:18)

Do you think that all businesses would kind of benefit from some sort of a fractional executive coming in and kind of relooking at things? A lot of times people bring in consultants to do that, but it’s just kind of like they look at everything, give you your PowerPoint and head out the door. But that fractional seems to be like that person who kind of partners with you for a period of time. Yeah.

Dan DeGolier (14:37)

Definitely.

You know, our model is based on long-term but part-time. So we’re generally looking at companies in the SMB market. we’re looking at generally we work with companies between 2 million and 100 million in revenue. so there’s a, that company scales, they might, some companies are too quick to hire a full-time CFO where they might really just need a full-time controller, a really solid control in our accounting team. And then a fractional CFO for a couple of days a week who is extremely well qualified in their experience.

could be a great fit for them to bring in that sort of true executive level oversight with decades of experience to help them navigate again, what those critical KPIs are, what the holes are in the different strategies that are being considered and things like that. yeah, companies that are, you know, over 75 or a hundred million, very likely to have a full-time CFO, a very qualified CFO, but companies, you know, under 75 million or depending upon the transaction complexity and transaction volume.

companies at that, at that small and medium sized businesses and really benefit from having a top notch CFO on their team, but it may not need to be a 40 hour or 60 hour a week job. can, can maybe be a 20 hour a week type engagement.

Adam Larson (15:50)

You get that full-time experience, that experienced person there, but you may not necessarily be able to afford that, the salary that would require to have that person on full-time.

Dan DeGolier (15:59)

Yeah. And it may, there may not be enough truly strategic CFO level work that for that person that you need to have someone in that someone in a, on a full time basis. That’s not, that’s what our whole model is kind of based on you as you grow and evolve, you get the resources you need on a, on a fractional basis. We’re made up of, you know, our, our team is CFOs and VPs of finance and controllers, accounting managers, financial analysts, senior accountants. So we’ve got a full stack of people with, with different levels of experience who can come in and support a company during its,

growth phases and you kind of pay for what you need as opposed to having a real heavy fixed cost on your GNA budget, GNA financials.

Adam Larson (16:39)

That seems like a really good benefit, especially for the small to medium sized businesses. Is it beneficial for like a startup if a startup is just kind of getting going as an entrepreneur? Is it good to bring in fractional folks or do you think full time would be more beneficial?

Dan DeGolier (16:52)

I think, I think fractional makes a lot of sense for an early stage company. You know, I look at it kind of as a kind of a step function. You start out, maybe you just need a part-time accountant to make sure things are being coded properly. Once you have revenue and you’re ready to raise around the capital, then you probably want a strategic fractional CFO or VP of finance who can help you with that, with a capital fundraise, help you with that, you know, with a really robust financial model and understanding what your KPIs and drivers are.

And then over time you start to fill in some of those roles on a full-time basis as you get a growth cycle. So, you know, it’s not uncommon. You start with a, maybe you start with a fractional senior accountant and a little bit of oversight from a fractional controller. And then that evolves into, you know, a full-time, or two full-time accountants and then a fractional CFO. And then eventually you get a full-time controller and just kind of builds as you, as you go up the, as you go up the ladder in revenue and, and, and fundraising.

Adam Larson (17:48)

So this is not have to do with fractional CFO, but I want to throw this question out there and you feel free to answer it or not. do you think that the evolution of AI will help bridge the gap between a US gap and IFRS to make it a more international accounting standards?

Dan DeGolier (18:02)

think

it definitely has potential too. think that there are, you know, there’s, there’s, there’s logic in the way that, that, ⁓ things like RevRec and other things are being handled between IFRS and USGAT. So I think there’s, definitely some good potential there.

Adam Larson (18:16)

Yeah. I don’t know. Cause I just feel like as we become a more global world and how we do business and everything, would make more sense to have a globally recognized accounting standard so that everybody’s doing the same, has the same kind of standards that they live up to. Obviously different countries have different beliefs and stuff like that, but it would make sense for us to think globally. Yeah.

Dan DeGolier (18:38)

I like that. I like that. I hadn’t given that a lot of thought before, but that does make a lot of sense to me.

Adam Larson (18:42)

Mm-hmm. Well, Dan, I want to thank you so much for coming on the podcast. It’s been great talking with you. Thanks for so much for sharing your knowledge and expertise with our audience.

Dan DeGolier (18:50)

It’s

a Adam. really was fun to meet you and fun to discuss these emerging technologies with you. This has been Count Me In, IMA’s podcast, providing you with… From the accounting and finance profession. Like what you heard, and you’d like to be counted in for more relevant accounting and finance education. That IMA’s website at www….

Adam Larson (19:01)

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