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Brad Silicani on Cash Optimization and Corporate Investing

In this episode of The Role Forward, our host Joe Michalowski welcomes Brad Silicani, the Head of Finance and Operations at Anrok. They get into the state of the economy and cash management, how to kick your cash in the right direction to get to market, and the relationship between tax and cash optimization.

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Brad Silicani on Cash Optimization and Corporate Investing

Episode Summary

In every business, the goal is to protect cash and to build a product to get to market. And big companies, which earn tons of revenue, are successful at cash optimization.

But there is so much pressure in the economy — interest rate movement, inflation, rising prices — that needs to be overcome. And that could be difficult for companies that do not make a profit and do not have the money to invest.

In this episode of The Role Forward, our host Joe Michalowski welcomes Brad Silicani, the Head of Finance and Operations at Anrok. They get into the state of the economy and cash management, how to kick your cash in the right direction to get to market, and the relationship between tax and cash optimization.

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Featured Guest

Brad Silicani

Head of Finance and Operations, Anrok

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Brad spent the first part of his career with Ernst and Young. After about four or five years, he moved to Dropbox in an accounting role and spent almost ten years in various roles such as Corporate Controller, Head of Tax, and Treasurer. Finally, about a year ago, he joined Anrok as the Head of Finance and Operations.

Key Themes from the Episode
  • Rising interest rates bring up a conversation finance hasn't had in the last few years — the opportunity to generate return with the cash on your balance sheet.
  • Investing in money market funds can be a great way to optimize cash.
  • Relationship building is the difference-maker for any strategic finance function.

Episode Highlights from Brad Silicani

6:00 — Even When Expenses Are Higher Than Revenue, Opportunities Still Exist to Invest

“If you’re a company that just raised a few million bucks or tens of millions of dollars, you’re going to have cash in the bank. And yes, you’re in a situation where you’re in a cash burn. Each month, your expenses are going to likely be higher than your revenue. But the opportunities still exist for the cash — you have to make some very low-risk investments here, into government tax securities, where you can generate a return on your cash. And so, that return may be a couple of thousand bucks. I think as interest rates start ticking up, there are opportunities to make tens of thousands and hundreds of thousands of dollars even with, maybe, $10 million of cash there. That’s not going to be something that is going to make the biggest differentiator in your business, but it’s also a headcount. You can pay for another FTE, you can pay for the holiday party, and it’s something where finance is uniquely situated to be the only organization within a company that can directly put cash back into the business without actually selling to a customer.”

7:05 — Keeping up With Inflation

“If inflation continues to increase, prices go up — just letting cash sit in your bank and not earning any interest on that is, in theory, losing money, in terms of your spending power. So putting that to work in generating a little bit of interest income can help you keep up with that inflationary pressure as well. And then you take that to the larger organization or a public company, like Dropbox or beyond, and you have a whole host of investment options and different approaches that you might be thinking about to really optimize that capital.”

12:16 — What Happens if Interest Rates Go Down?

“The focus of corporate investing should really be on debt securities. Debt securities mean that you’re going to earn a return based on the interest that is there. Separate from the equity markets, which are coming down now, we expect the interest rate markets to be going up there. 

As you think about interest rates going up, if the expectation is that they’re going to continue to go up, say over the next 12 to 24 months, you want to be a little bit careful on the duration that you select for your debt investments. Because if you selected a one to two-year duration, and that’s that maybe 25 basis points, you’re going to be locked in on that investment and miss out when interest rates get moved up to 200 basis points, maybe in 18 to 24 months. I think that’s a mistake. You gotta just keep an eye on, ‘Where are we going? Are we going up on interest rates?’ And then, if you’re coming back down, also consider how your cash is turning over there. ‘Cause every new dollar you’re going to be able to invest is likely going to be at a lower return if the interest rate trajectory here is coming down. So being able to hold on to some of those might actually be a good strategy if you see interest rates coming back down.”

23:43 — How Does Tax Play into Cash Optimization?

“The relationship between tax and treasury is a really tight one. You’ll often see in larger organizations that they are even combined. I think the second part of this is that taxes are a very broad term as well. There are lots of different types of taxes. So you’re going to want to think about income taxes as you generate some of those returns; you’re going to want to think about sales taxes and other types of taxes as you think about managing your cash flow. And so I think a practical tie-in for the small to medium-size tech company here is thinking about how your cash flow as a business impacts the amount of cash that’s in your bank account.”

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