Speaker 0: The Payments Podcast from Bottomline.

Owen McDonald (host): Welcome to the Paymode edition of the payments podcast. I'm Bottomline Managing Editor, Owen McDonald. This series of Paymode themed podcasts looks at the hottest trends in business payments with Paul McMeekin, Vice President of Marketing at Bottomline, along with expert guests. In this episode, Paul welcomes Patrick Sunday, Chief Accounting Officer at Bottomline, as they discuss controlling operational costs, the insights and guardrails that data driven accounting delivers, Gen AI myths, and much more. Here's Paul McMeekin and Patrick Sunday.

Paul McMeekin (cohost): Welcome to the Paymode podcast series. I'm delighted to say Patrick Sunday is joining me today. Welcome, Patrick.

Patrick Sunday: It's great to be here. Thanks, Paul.

Paul McMeekin: Thank you. And for those in the audience who don't know you, you're one of the people working inside Bottomline for the benefit of our customers. Can you just describe your role a little bit?

Patrick Sunday: Yeah, sure. So, I am the Chief Accounting Officer at Bottomline here. So, just to put that into context, my organization contributed to roughly 120 resources globally. And, essentially, what we're overseeing is all of the shared service transaction processing and AP, AR. We do all the controllership, all the audit work. We manage all the corporate tax stuff. We also manage a deal hub process, so there is a big interface between my organization and sales, and I can certainly get into that. And so, yeah, it's a big remit. We're a big location in India as well as we're scattered around the U.S. and the UK.

Paul McMeekin: We want to talk today about trends and priorities driving financial decision-making. It is kind of our overarching themes there. And so, my first question diving straight into it, what do CEOs and the board of directors value when it comes to the finance function?

Patrick Sunday: I think first and foremost, Paul, honestly, when you think about finance and I'll get into this a little bit where the function historically has been very much an administrative reporting function, and I think we're at a kind of crossroads now where the finance function is actually evolving. It is something much more value added and strategic. So, I think, first and foremost, the board and CEOs, they want finance to run it cheaper. So, how do you run it more efficient, faster? You can do those sorts of things because if you're a growth minded CEO and board, you don't want finance staff to add incremental cost as you're growing.

So, you have to be able to set up your organization to scale with a rapidly growing business. And so, when you look at Bottomline, we're growing north of 15%, and we've been around for 35 years. That's a pretty big expansion year over year. So, to be able to set up your organization to provide maximum support to the business without having to add cost each year as the business is growing, I think is first and foremost what they expect. 

Secondly, they want, on one side of their mouth, they want you to move faster. How do you close faster? How do you build a forecast faster? But, at the same time, you can't compromise precision. So, it's finding that right balance between moving faster, but also maintaining an adequate level of precision to be able to provide those meaningful insights as to how the business is operating, which will hopefully be able to drive more impactful strategic decisions. 

So, that gets me to my third point. The really big value add is where finance can provide those insights quicker, to essentially be driving those meaningful strategic decisions. And so, how do you do that? Providing guardrails for the business, establishing performance operating metrics that you can hold different various functional leaders accountable for, setting company priorities. Within finance, we can do that. And I think we're kind of uniquely positioned in a way that we see things before everybody else.

And so, being able to bring that to the forefront in a much more, I'd say, transparent and effective manner, I think is really where the general boards that I'm seeing as well as various GM/CEOs, however you want to refer to them, that's really where they're getting the value out of the finance function.

Paul McMeekin: That makes sense. So, just a just a follow-up question. What interesting use cases are you seeing with regards to AI?

Patrick Sunday: Yeah, it's interesting. So first off, this will be part of what I've been talking about to other groups that I do socialize with is that there's a big myth out there right now that AI is going to make finance redundant. And so, we're no longer going to need people to run the finance function. That is a myth. That's not true. 

However, what is true is that all functions, but finance in particular, needs to figure out a way to embrace the capabilities of AI and to actually deploy a thoughtful strategy. Now, right now this is very theoretical. I have not seen a lot of use cases, but what I have seen people talk about is how can we leverage AI to do more kind of routine tasks, reconciliations, cash application, things like that.

How do we use AI to do more enhanced data analytics? That's definitely one that I think is going to come to the forefront of a use case that can be deployed pretty seamlessly. Also, predictive analytics. One of the biggest areas that I'm seeing that AI is being kind of harvested around is around cash forecasting. So, how do you deploy the AI capabilities across your different order to cash reporting silo to be able to understand and predict when we're going to start seeing those inflows come in and then on the payable side, when do those outflows and then ultimately, how do we go ahead and build a forecast off of that? So, have I seen this done successfully? No. But there's a lot of people talking about it. 

Also, another thing is risk management, fraud detection. One of the things, and when I think about payments, is that it's such a huge addressable market doing a very manual, onerous payment process, which by the way is the norm out there. So, there is so much to go after there, but just given the age of fraud and the age of these fraud actors or bad actors if you will, getting into your ecosystem, it's becoming so easy, and AI is a tool for them to do that. So, to be able to counteract that threat with AI of our own within the payables process, I think is definitely something that is going to prove to be incredibly critical as we continue to progress in this new digital age with AI at the forefront.

Paul McMeekin: When you're thinking of the finance function, what benchmarks do you look at and how does the finance organization become best in class?

Patrick Sunday: So, I think there's a couple of things. So, when we think about performance metrics, we talk about just the closing cycle. When I got to Bottomline, we probably operated under a fifteen-day closing cycle just to close the books. Today, we do it in six days, and that's really without any real meaningful investments in a digital transformation.

So, I think to be able to do that just through pure process diligence and just globalizing the function, I think companies like ours, we're not that dissimilar where companies grow regionally, and all of a sudden you have this regional silo of a mix of region and product line. And so, you tend to gravitate and build your function to support that. So now, all of a sudden, you have a bunch of disparate processes globally. We've done a ton of work since I've been here to really globalize everything we can, and that's really helped us to speed up our overall closing the books process.

And then that dovetails into the FP&A function. Right? So, they typically need to wait until the books are closed so they can start their next forecast cycle. So, they've been able to start that earlier and get through their cycle earlier. So, now I think between the accounting and FP&A teams, we're basically done our close and forecasting cycle within 10 days, which is that best in class? I wouldn't say it's best in class because I think there's an opportunity now through deploying a more robust digital transformation strategy, to be able to even enhance it even more. But that's pretty good. So, definitely just process wise timing, we measure ourselves on that. 

More specific to my function, when we think about working capital, that is the lifeblood of what we're doing, how we're able to deploy investment capital, whether we're doing it into development or into sales and marketing or we need to beef up G&A, that comes through working capital. And so, the biggest indicator there is DSO. Right? How from the day we sell a deal to when we actually start to generate some of that cash flow, what does that look like? So, we're constantly tightly measuring that on a monthly basis. And so, that's definitely a huge indicator as to how well we're managing our working capital. 

And then you have things like days payable outstanding. We have various compliance with our lenders. We have various reporting deadlines that we have to hit. So, there is a plethora of stuff like that, that we use to measure ourselves, but those are just a few to highlight that I think really speaks volumes as to how well we're performing.

Paul McMeekin: Okay. So, you had a really good story about the closing cycle. You mentioned a few different metrics there. What about DSO? Have we got a similar success story there?

Patrick Sunday: We do. We do. So, our order to cash function has grown tremendously through a very diligent location strategy in Bangalore, India. And so, the majority of our collection and cash application staff resides there. So, over the last year and a half, that's how we've kind of built the sort of org optimization.

So, it's taken time for this team to be stood up over there with critical mass to be able to execute and deploy different tools to be able to drive more timely collections. And I think we've gone from, I'd say, the last year and a half at DSO of close to 60 to the point where about two months ago, we were down just below 30. It was sorry, below 40. It was actually at 39. So, to have a twenty-one-day improvement is remarkable.

We did have a significant billing event that has crept that back up, but we have brought that down again. And so, anytime you can run a DSO process below 45, if that's a metric, that's usually pretty good. But just the drastic improvement and how rapid that happened here at Bottomline was just a tremendous success story.

Paul McMeekin: Changing slightly from successes to challenges. What challenges does the finance function face in the next two to three years?

Patrick Sunday: Paul, I would say how much time do we have? I'll try to keep this brief. I think first and foremost, and I'm not going to get into this too much, but navigating all the economic uncertainty with everything that's going on and just the equity markets and the bond markets with the tariffs and everything like that, this is a very difficult time.

So, how do you navigate that, and really build a pretty nimble planning and forecasting process? It's very difficult in this environment plus trying to predict. I mean, we're in payments. If we enter into a recession, which many people believe that we are, what does that mean for our corporates in terms of their spending? Our biggest growth engine is Paymode.

And so, we need to do what we can to push as many dollars into that network. Well, if things need to be tightened up because of just the macroeconomic kind of environment that we're entering into, how do we navigate that? So, I think that's number one. 

I think also, I'll keep using this word. I know it's a buzzword, which in terms of digital transformation, but it is so important. And I'll tie that into AI because you can't really use the word digital transformation anymore without AI. And I think being able to build an ecosystem of integrated solutions, and it might not be everything, but having a way to connect your ERP to your payable system, to your procurement system, to your planning system, all the way to some sort of a data warehouse, which brings me to my next point is that having a proper data governance strategy is probably critical, priority number one. To be able to actually utilize the capabilities of AI because AI is only as good as the underlying data that it's actually mining. 

And so, I think that's why a lot of organizations are struggling right now. So, I think this is going to be a challenge because, I don't want to say it's an arms race, but every company is going to be trying to find a way to successfully deploy, whether it's in finance, whether it's in operations, whether it's in your compliance function, whether it's in your cybersecurity function. Every function within every organization is going to try to figure out a way to leverage it.

And I think the first thing that we can be doing as custodians of the data is really employing a strategy to make sure that our datasets are clean, they're complete, and that they're actually usable.

Paul McMeekin: So, you speak to CFOs, you speak to treasurers, you speak to CEOs, your peers. If you could give one piece of advice to that cohort about the future of payments, what would it be?

Patrick Sunday: The future of payments, particularly if we're going to talk about in our space, having secure, automated payments is not going to be a nice to have. It is going to be a requirement. And so, a couple of things to mention there. When I mentioned before about the threat actors that are out there and the different sophisticated methods in which fraudsters are getting into our system, there is going to be such a need for companies to have that security blanket over their working capital. There is no question. And I'll just give you one data point that backs that up. 

Being able to monitor all the different companies that operate whether they be in our arena or in adjacent arenas within fintech, but Visa is a great story. You look at Visa they had a couple investor days recently where they're basically talking about the payments market and that it's roughly 85 trillion of addressable market. And so, they sit over 60 of it or something like that, that is more in virtual card and card payments and things like that.

But the overall AP and AR are kind of like B2B, the place that we operate, they're not really playing in that space and that is absolutely part of their strategy. They see that that is definitely an area, like I said, at the top of the call, there's just so many companies that are so archaic when it comes to managing their payables that I just think that there's going to be a ton of momentum, now in particular, to get more security around that, to get more automation around that, and, obviously, Visa sees it. If you actually see their top five bullets of their strategy going forward that they just communicated at an investor day, number three is to go after this additional 35 to 40 trillion dollars of B2B transactions between corporates. And what that would be is building a network like we have.

Paul McMeekin: Well, Patrick, thank you for joining me today.

Patrick Sunday: Of course.

Owen McDonald: Balancing payment speed with precision, generating better insights from your finance function, getting the most out of AI using the right data. It's the rather exciting world of B2B accounting and payments. Thanks to Bottomline's Patrick Sunday and to cohost Paul McMeekin. To our fantastic audience, thanks for listening. 

Hit subscribe. Catch us again on your favorite podcast platforms, including Apple and Spotify. Bye for now.

Speaker 0: The Payments Podcast from Bottomline.