We’re Ellen and Simone. After 36 years in finance, we’re ready to share what textbooks won’t tell you.

💛 Welcome to The CFO Playbook – your practical guide to real-world finance insights. A bi-weekly newsletter we’ll send out every other Thursday. The full read will take approximately 5 minutes. If you’re enjoying the newsletter, we’d greatly appreciate it if you shared it using the “Share the Newsletter” button at the end of this email.

📖 READ OF THE WEEK

Over the next two editions, we’re diving deep into how AI is transforming finance.

This Week: Where We Are and What’s Coming

In today Newsletter, we’ll explore the current state of AI in finance, what the future holds, and what you should already start doing right now.

Next Edition: Real-World Use Cases

In two weeks, we’ll share several real-world AI use cases that can streamline your day-to-day work. Spoiler: it’s not just about ChatGPT!

AI is coming and Finance is no exception. Scared?

We believe AI entering the finance world is something to celebrate! Finance teams now deal with tighter deadlines and heaps of data. Instead of hiring more people, why not let tech turn your team into a superstar squad?

Imagine a world where:

• Invoices, payments, and GL entries are automated and error-free

• Real-time answers to questions from stakeholders—whether investors, management, or clients—are fast and accurate

• Financial Models can be completed in days instead of weeks

• You can say goodbye 50-tab Excel sheets!

AI is our chance to put automation first

It’s the perfect way to make our finance teams more efficient and effective. 

Are we there yet?

AI in finance is a journey, not a destination. While there are a couple of things you can use AI for already today: Everyone should have their AP (Accounts Payable) automated by now, OCR (Optical Character Recognition) has been around for years, allowing documents like invoices to be scanned and digitized. AI enhances this by automating the entire process, from data extraction to approval. It's not a new invention but an essential upgrade. So, no excuses if you haven't automated yet!

Utilizing LLMs like ChatGPT for generating policies, helping with complex excel formulas, drafting emails, and even preparing month-end closing schedules, the bigger game-changing use cases for making finance teams much more efficient and effective aren’t fully here yet, but they are rapidly approaching.

This summer, we interviewed various CFOs, Tool providers for Finance teams and Investors to grasp the current state of AI for finance teams.

While there is a positive sentiment towards AI in Finance:

We’re seeing significant VC investments flowing into finance tools, with much of the funding directed toward advancing AI-driven product roadmaps. There are already some exciting developments, especially in the budgeting space, where AI is enhancing planning and forecasting capabilities.

There are also a couple of roadblocks we identified - which act as a blocker for AI adoption today.

• Outdated Systems: Many finance teams are stuck with legacy systems (think SAP, old versions of MS Navision - you know what we are talking about 😀) that don’t play well with new AI tools. Integration is a huge hurdle. The future might see a mix of old and new systems working together. The integrations will continue to improve as more and more finance teams start using new tools alongside their legacy systems.

• Cultural Challenges: Finance teams are known for being risk-averse, great for data quality, not so much for innovation. It’s time to push beyond the comfort of Excel (though it’s not going away completely) and embrace new tech.

• Data Issues: Complex and inconsistent data can trip up even the smartest AI algorithms. As we’ve mentioned in previous newsletters: Ensure your data is clean. AI won’t do that for you. 

• Data protection: Is a must, but there are ways to make it work, e.g. using a company account for AI tools, like ChatGPT to keep data secure. Security concerns need to be addressed appropriately, But PLEASE don’t use them as an excuse for NOT using AI!!

• AI Readiness & Limitations: Financial tasks need precise calculations and compliance with regulations areas where AI is still catching up. AI tools are improving but can’t yet handle complex financial analysis without human oversight. Plus, you can't rely on AI alone (yet). It’s not enough to say to the auditor, but "ChatGPT told me to implement IFRS 15 this way." Human review is still crucial to ensure compliance.

In a nutshell: AI in Finance is still evolving. AI is making strides, but it’s a work in progress. 

But let’s not fool ourselves and remain passive. You can TAKE ACTION TODAY! 

Step 1: Get Your Data House in Order

Data is the fuel for AI! Move to the cloud (if not already done) for reliable access. Make sure you have a Single Source of Truth (SSOT) for high data consistency and availability: Your data should live in a central and accessible place - not in 100 different tools or spreadsheets. For more details on how to get there, check out our previous newsletters, where we covered this topic in depth!

Step 2: Empower Your Team

Many CFOs we’ve spoken to are already using AI in their daily work for tasks like translations, drafting emails, creating summaries, writing policies. As they adopt these tools, they also expect their teams to do the same.

Step 3: Make sure your Financial Model reflects the change

As AI transforms the Finance and Company landscape, your Business Plan will need to adapt, with shifts in hiring needs and increased investments in AI tools, while larger companies may even build their own AI capabilities in-house.

Bye bye manual work, hello strategic analysis - the future finance team will be value first!

Automation will free up time for finance professionals - zero touch automation will be the name of the game. This means moving away from transactional tasks towards activities that drive the strategic direction of the business.

Hell yeah - no one will miss this manual work! But will AI only remove manual work?

Certainly not, it will elevate your team’s capabilities.

• Scenario Planning & Forecasting: AI runs "what-if" scenarios, helping teams evaluate the impact of new revenue streams, product launches, and hiring plans. Imagine this to happen with speed and precision! This enables finance teams to make data-driven decisions and respond quickly to changing business environments.

• Data Analysis & Insights: AI-powered tools help finance teams quickly analyze data, spot patterns, and generate smart insights - no more manual digging. This will be the new superpower of your team accelerating decision velocity massively!

• Automated Reporting: AI automates financial reporting, such as monthly investor reports, streamlining reconciliation processes like matching ARR to revenue to cash. 

• Compliance and Fraud Detection: AI will spot anomalies faster than any human: If your company usually pays a supplier $5,000 and suddenly there's a payment for $50,000, AI will stop this BEFORE it’s paid out. 

• Regulatory Compliance: If new tax rules require your company to submit certain forms, AI will automatically keep track of these changes, ensuring that your company remains compliant with the latest regulations.

Wow, this sounds really scary. Will AI replace all Finance Teams?

Short answer: NO. But it will shift your focus and some skills become even more important.

Critical Thinking is Key! Finance teams will need to interpret AI-generated insights and apply them to the broader business context.

Soft Skills are King! As we step into more strategic responsibilities, making sure everyone gets what we’re saying is crucial. We need to break down our insights and recommendations in a way that everyone, from the execs to the team, gets it and takes action.

AI Webinar Tip: This video features a conversation between Ajay Vashee (IVP) and Sowmya Ranganathan (Controller at OpenAI), offering valuable insights on how AI is revolutionizing finance by automating processes. Well worth the 45 minutes for every CFO and their teams!

💡 QUICK INSIGHTS

The Good, the Bad, the Ugly - Shared Learnings

Why we are no fans of software capitalization (to boost your P&L)…

First things first: Software capitalization means decreasing the cost for R&D in the P&L for a specific period and activating it as an asset on your balance sheet. In your P&L, it’s either recognized as “other revenue” or directly offset in the cost. It shows up as intangible assets on the Balance Sheet.

Well, if you think value for money, let’s first think about the value you get out of this:

• It shows a better EBITDA for the period you capitalize. That is fantastic, right?

• Yes and no. At the end of the day, capitalizing software is some sort of “accounting magic”. Investors know about it and will make haircuts to your P&L and model. Cash is king, so they will look for something as close as possible to Cash EBITDA. Therefore, many investors use EBITDAC, meaning EBITDA before capitalisation.

• Software capitalisation follows accounting standards, not business logic. This means, that the standard determines how much you can capitalise. And if we are really honest, most of the standards have a lot of room for interpretation. In reality you could push for a high or low capitalization which creates a lot of fluff in your P&L and makes it even less benchmarkable with other businesses.

Don’t forget, there is also a cost to this:

• Software capitalisation means a lot of extra work for your team since it requires massive documentation (everybody who has gone through an IFRS audit, knows what we are talking about 😉). 

• This means, you need to update your documentation on a monthly basis and also need to plan extra time to prep the audit. 

However, sometimes you still need to know how much you're capitalizing, especially if you're dealing with businesses in the US. Certain things, like the 409A valuation or US tax filings, may require this information, even if it wasn't capitalized in the German entity. But these are mainly tax regulations and don’t really reflect the business view.

In a nutshell: If the accounting standard you apply doesn’t require you to capitalise software, spend your time with activities that add more value.

💼 JOB SECTION

We’re connecting companies with the right candidates based on key criteria

• Remote work

• Salary expectations from both sides

• Technical skill set match

• Career growth opportunities

Companies: Register here
Applicants: Register here

Let’s find your perfect match!

🕵️‍♀️ EASY QUESTIONS - DIFFICULT ANSWERS

READER QUESTION OF THE WEEK

Question: For bookkeeping topics such as AR, AP, banking/payments, and regular employee accounting (accruals, etc.), do most firms at Series A/B stage handle this in-house via a trained financial accountant, or is outsourcing more common?

Answer: It depends on the complexity of your setup and your company’s growth stage. Here’s a quick breakdown:

In-House (End of Series A, Beginning Series B, High-Growth from the start)

• Better Quality & Speed: In-house teams provide higher quality and faster updates. You don’t want to wait a week for your accountant to make adjustments or rebook entries. We’ve often seen outsourced accounting leading to lower quality. External accountants usually have a tax-focused/statutory view, not a management accounts perspective. Financials can be messy, with missing (not booked) documents and incomplete reconciliations.

• Complexity: If you have multiple entities, coordinating external bookkeepers can quickly become messy. In-house teams handle this complexity much more efficiently. Many worry about different GAAP standards, but the differences are often minor and quite manageable.

• Cost: Outsourcing can often be much more expensive than hiring a good in-house accountant. Yes, it’s a challenging hire, if not the hardest in the entire finance team…we know, but it’s worth the time and money to invest in it.

Outsourcing (For early-stage or small not complex company setups):

• For early-stage companies with only one or two entities and low transaction volume, outsourcing can work well, allowing founders to focus on growth.. what they should be doing at that stage, not setting up perfect accounting systems.

Summary: Outsourcing is fine early on, but as complexity grows, aim to build an in-house team. Investing in a good accountant pays off. It’s a tough, but crucial hire!

Got a burning question? Fill out this form

UPCOMING READS OF THE WEEK

• AI for Operators: Real world use cases

• How does the future Finance Team look like?

• Finance Tech Stack 2025

• …and many more

CLOSING REMARKS

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Send your feedback, suggestions, or requests to feature something in future editions to [email protected]. We’d love to include your input.

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The CFO Playbook reflects our personal opinions, not professional advice.