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
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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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.
- 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.”
[00:00:00] I think the core principle to remember, as you think about managing cash for your businesses, is that your investors gave you money because they thought that you could make a really good product as a company. And that’s what they invested in. So, I think the mistake here is, like, going too far. You gotta stay, like, principle to, like, I’m here to, like, preserve a capital and just make a little bit of return.
[00:00:19] So, that’s, you know, the business can focus in on placing big bets on, you know, building our product and winning there.
Brad Silicani Introduction
Hello and welcome to another episode of The Role Forward podcast. My name is Joe Michalowski and this episode is brought to you by Mosaic, a strategic finance platform that transforms the way business gets done. And today I am joined by Brad Silicani, Head of Finance and Operations at Anrok, the modern sales tax solution for the internet economy.
[00:01:05] Joe Michalowski: Brad, thank you so much for joining.
[00:01:07] Brad Silicani: Yeah, thanks for having me, Joe.
[00:01:08] Joe Michalowski: Yeah. Uh, so, you know, usual podcast field before we kind of jump into main topic. Can you, uh, give us, like, the two-minute background on yourself, the work you do at Anrok, how you got there, all that kind of stuff?
[00:01:19] Brad Silicani: Sure.
[00:01:20] Yeah. happy to do it. So, maybe starting with, the start of my professional career here, my backgrounds on the accounting side of things. So, I spent the first part of my career with Ernst & Young, an audit and a technical accounting there. And after, about four or five years I jumped over to Dropbox
[00:01:32] and joined the company when they were about eighty people in an accounting role and spent almost ten years there, in various roles as the Corporate Controller, the Head of Tax and Treasury. And I ended up leaving about a year ago to join Anrok. And at Anrok, as mentioned Head of Finance and Operations.
[00:01:48] Brad Silicani: But in that role I get to do much more and include managing our sales team. And all the fun parts of the non-finance operations, as well. And so, I was excited at that opportunity to really grow beyond, you know, professionally the finance organization and learn about other parts of the business.
[00:02:01] And I have been doing that for about a year, here at Anrok.
[00:02:04] Joe Michalowski: Nice. I didn’t realize that you were at Dropbox expert. Did you work, so we’ve had Ajay on the podcast before, did you work with Ajay For a while?
[00:02:11] Uh, yeah, Ajay was my direct manager for about eight years.
[00:02:16] Joe Michalowski: Oh my gosh. I would say just a little bit, just a little bit of time with Ajay once in a while. Uh, here and there, we know each other.
[00:02:23] Wow, that’s awesome, a nice little a rounder. He was our first guest on the podcast, so cool that, uh, you know, we’re just going full circle, but so, um, yeah.
[00:02:31] Brad Silicani: He was my first introduction to Mosaic too. Back when we both were still at Dropbox. He’s like, “Have you heard of this company? Do you know about it?”
[00:02:37] Joe Michalowski: Oh my God.
[00:02:37] Brad Silicani: And that’s how I first heard about Mosaic.
[00:02:39] Joe Michalowski: I should’ve known that. Small world in, uh, Silicon Valley and startups. So, should have known that something like that would come up. But, uh, no, that’s awesome. Great to hear about your background, you know, interesting that there’s a connection there. And so, before we, we, you know, agreed to get on this, we always ask guest, like, what their, what their topic of choice might be.
[00:02:57] And you’d sent me a note about talking about, like, cash optimizations and kind of the state of the economy. So today, main topic is going to be every finance person’s favorite topic, and it is cash and cash management. Not going to rehash, like, the pandemic context. Like, I think it’s safe to say the state of the world is a certain type of way and that leads to uncertainty for the markets.
[00:03:21] And in turn people like yourself, people like, the people Mosaic sells to. And so, can you just tell, talk a little bit about, maybe the current market context? Like, what made you think that that was the topic and, like, where we’re headed in 2022?
An Opportunity to Generate Returns from Cash on the Balance Sheet
[00:03:34] Brad Silicani: Yeah. So, I really enjoy this topic. I had a chance to spend about four or five years in the Treasury at Dropbox and working with R.J., spending a lot of time to figure out what, kind of, what we needed to do with our cash. And, you know, when I started that journey, it was in an interest rate environment that was very similar to kind of where we at today, which is, you know, zero interest rates.
[00:03:50] And so, not much opportunity to make a cash there. Interest rates did tick up a couple of years into that. I think we got up to, like, a two and a quarter basis points or 25.5 basis points there. And then, I quickly came crashing down on the pandemic. And I think, in the environment we are right now is a particularly exciting time, from an interest rate perspective in that, the expectation is that the federal reserve is going to be increasing interest rates in a couple of weeks here and potentially very aggressively due to inflation and other pressures across the economy.
[00:04:18] Brad Silicani: Which then brings, I think a really interesting conversation back for the finance organization, which, which we haven’t had to have for the past few years and even maybe the past, largely the past decade, which is like the opportunity to actually generate
[00:04:31] you know, some return, uh, with the cash that you have on balance sheet and, and put that to, you know, help supporting your company. And so, I found that, you know, in my journey about learning about this area and managing it for Dropbox, it was one where there’s a lot of mystery. You get a lot of advice from a lot different folks.
[00:04:45] And so, I really enjoyed trying to navigate that and, and that’s often like a piece of advice that I’ve helped share with other finance leaders about my experiences there and kind of what they can do to help, think about how are things and optimize for their businesses. So, I think we’re at, like, the precipice of starting that journey again, right,
[00:04:59] where, depending how fast the federal reserve goes here, opportunity’s back. And I think that conversation is really going to come to the forefront, for everything from, like, small startups who just raised few million bucks all the way to your large public companies, right? Who have maybe hundreds of millions or billions on the balance sheet.
[00:05:14] Joe Michalowski: Well, so that’s why I wanted to add it. ‘Cause this, this is, uh, you know, I’ve learned a lot about finance just from writing content for Mosaic and talking to people like you. This is not a topic that has come up in my conversations. So, I’m excited to learn more about it. But the thing that I want to start with because I don’t understand it myself is how, how does this impact, like a, you know, earlier stage, like VC-backed startup, like they’re not generating tons of revenue, like, they’re not generating a profit, so they don’t have money to go invest to, like, take advantage of these things.
[00:05:43] How does, how does this conversation work for those companies versus, like, a Dropbox that obviously has a lot of cash and a lot of business coming in and out? So, yeah, I’d love to, like some more context about how that works.
[00:05:55] Brad Silicani: Yeah, I think, as you added, it’s definitely a spectrum of kind of what you’re going to think about and how you’re gonna approach this challenge. I think starting on, like, the small end, 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.
[00:06:08] And, and yes, you’re in a situation where you’re in a cash burn, right? Each month your expenses are gonna likely be higher than your revenue. But the opportunities still exist there, for the cash that you have raised to make some very, um, I would recommend, you know, low risk investments here.
[00:06:25] Um, into, like, government type securities where you can generate a return on your cash. And so, that return, you know, maybe a couple thousand bucks. I think as interest rates start ticking up, there’s tens of thousands and hundreds of thousands of dollars opportunities here, even with maybe $10 million of cash there.
[00:06:39] And yeah, that’s not going to be something that may is going to, you know, make the biggest differentiator in your business, but it’s also a headcount, right? You can pay for another FTE, you can pay for the holiday party. And it’s something that, like finance is uniquely situated to be the only organization within a company that can just, like, directly put cash back into the business, right,
[00:06:57] Brad Silicani: without actually sell it to a customer. So, you know, you think about that and then also think about the backdrop of, you know, the inflationary pressures that are happening right now, where, like, you know, if inflation continues to increase, prices go up, just letting cash sit in your bank and not earning any, any interest on that is actually, you know, in theory, losing money in terms of your spending power.
[00:07:16] So, putting that to work in generating a little bit of interest income can help you keep up with that inflation, inflationary pressure as well.
[00:07:22] And then, you take out to, like, you know, the larger organization on a public company, like Dropbox or beyond, you know, you have a whole host of investment options and different approaches that you might be thinking about and how to really optimize that capital.
[00:07:33] Joe Michalowski: Gotcha. So, obviously your background Treasury, I want to know more about like, whose responsibility this is and how, how that does evolve? So, you know, a startup that just raised, like, a Series A, like, there probably are, I’ll go as far as they definitely not going to have, like, a dedicated Treasury person or a Treasury department.
[00:07:52] And so, are companies thinking of, like, bringing that function on earlier now because of the up and down of the market or if not, like, who is responsible for that in the earlier stages? And like, how does that evolve as the company scales?
[00:08:07] Brad Silicani: Yeah, that’s a great question. I would say that, like, in general, companies are not going to think about a Treasurer until like an, an IPO, maybe a little bit before it and even maybe while after it. Largely depends on, like, what the cashflow of their business looks like. So, this conversation becomes even more interesting because the responsibilities here fall to, you know, a finance organization who does not have necessarily an expertise in Treasury.
[00:08:29] So, you know, from that Series A company that could be maybe even the, the founder, who’s kind of running the finance organization that could be a VP Finance. It could be a Controller, right? I think largely, this ends up along as you get into it and, you know, controllership and accounting organization, something that they may touch because they are, you know, managing reconciling bank accounts and things like that, but it could be, you know, easily within a, a VP of Finance.
[00:08:51] Brad Silicani: You know, scope as well. And so, you know, the opportunity for them is there, but you know, in my personal experience and journey, like coming from being an accountant and then becoming a treasurer, you know, I took responsibility for these things when I was the Controller at Dropbox. So, I had to, like, educate myself and that’s where I think I had a lot of exciting conversations with folks about just trying to educate them on kind of what are the small levers out there that you can pull
[00:09:14] to be able to help support your business. And then, yeah, eventually you can hand this off to a Treasury Organization, I think has gone well and they can do a deeper dive here.
[00:09:23] Joe Michalowski: Yeah. I love what you’re saying about, uh, kind of helping educate people. ‘Cause that’s, that’s exactly what we’re here for. And so, I want to get to strategies, like, in a little bit and maybe some like tips, but first, kind of piggybacking off of this idea of, like, what the context is, like, as companies scale.
[00:09:37] I’m curious if there’s like a handful of, you know, mistakes that companies make as they navigate, like, kind of uncertainty in the markets. You mentioned a mistake might be just leaving your money in the bank as interest rates go up. It’s like, you know, you’re not technically losing money, but you’re missing out on earning more money.
[00:09:55] So, are there any things you’ve noticed, maybe things you’ve learned over the years that our mistakes, as people, kind of navigate those?
[00:10:03] Brad Silicani: Yeah. I mean, definitely you could argue it. And I, and I gave the example of, like, leaving money alone and not earning interest rate could be a mistake. I think that’s a good mistake, though. Like, I think the bad mistake that, you know, people can make is going too far in terms of what they want to do for investments.
[00:10:19] And so, sometimes I talk to folks and they’re like, you know, “Should I take my money? Should we put it in cryptocurrencies? Should we put it in equity securities? Should we put it in, you know, a long duration things?” Because, you know, the return is going to be much higher, as you think about the rest trade-offs and duration of those types of assets.
[00:10:34] But I think the core principle to remember, as you think about managing cash for your businesses, is that your investors gave you money because they thought that you could make a really good product as a company. And that’s what they invested in. Like, if they wanted to go invest in a Bitcoin, they could directly go do that themselves.
[00:10:50] Brad Silicani: They, they could do that on equities as well. So, I think the mistake here is like going too far and finding some of those yields to be really attractive, particularly when, like, the market’s going up, up and up. That’s an easy trap to fall in. And really, you gotta stay, like, principle to, like, “I’m here to, like, preserve a capital and just make a little bit of return.”
[00:11:07] So that’s, you know, the business can focus in on placing big bets on, you know, building our product and winning there. So, I think, like, yeah, to recap, the mistake is just going too far. And it’s actually an okay mistake to do nothing, right? Yes. You like, in theory, you have lost money, but you have not in fact lost money, which is the part where, where you’re getting real trouble with your board if something goes wrong. It makes total sense. I’m personally not, I’m pretty risk averse. So, if I were in this position, I think I’d be very happy just to keep my millions of dollars and keep on building my business. But I like this idea of, like, striking a balance and, you know, making sure that you keep in mind that you’re, you’re there to build a product, you’re there to get to market.
[00:11:44] Joe Michalowski: And so, this is just a way to kind of kick your cash in the right direction to help you do that. You know, conversely, so, we’re talking about the market going up and up and this being like a particularly exciting time for finance and treasury people, it might not stay this way forever. So, in the coming months, years, whatever, if things start taking down again, what is a mistake that might have happened, like, in recent years or something you’ve noticed where, you know, there, there are 0% interest rates and you can’t do it, like, what’s something that might trip someone up in that situation?
[00:12:16] Brad Silicani: Yeah. So, when, uh, like narrowing that, I think, you know, the focus for corporate, uh, investing should really be on a debt securities.
[00:12:24] And debt securities mean that, that you’re going to earn a return based on the interest that is there. So, separate from the equity markets, which are coming down now, we expect the interest rate markets to be going up there.
[00:12:33] Brad Silicani: And so, you know, 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 now and, and that’s at maybe 25 basis points.
[00:12:51] 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. So, I think that’s a mistake that you gotta just keep an eye on what, uh, “Where are we going? Are we going up on interest rates?” And then if you’re coming back down, also consider like how your cash is turning over there.
[00:13:08] Brad Silicani: Right? ‘Cause every new dollar you’re going to be able to invest, it’s likely going to be at a lower return, if the, you know, the interest rate trajectory here is coming down. So, being able to hold onto some of those longer and racial ones may, might actually be a good strategy. If you see interest rates coming back down.
[00:13:23] Joe Michalowski: Gotcha. This is, this is the kind of conversation that I, I like, you know, I do content, I write for a living and there’s a lot of gray area and it just sounds like this is very much the same where there’s no, like, hard and fast rule. Like, this is what’s happening. Do X, Y, and Z. Like, you have so many options and it’s really up to someone in finance to have that sort of strategic mindset or if, like, there’s a dedicated Treasury person, like this is, this is very much strategic growth oriented. And, you know, it’s just cool to hear you kind of think through, you know, how to make that work for a corp, for an organization. And so,
[00:13:54] Brad Silicani: Yeah.
[00:13:55] Joe Michalowski: I want to roll this into a sort of a meatier topic, which I don’t, I’m not really sure what this looks like.
[00:14:01] Like, I know I want to talk about strategies. Like, what are, like a handful of strategy somebody can do to optimize their cash in market like this one. And I don’t know if this is something that has like a list of five things. It’s like here’s strategy number one, with, like, a real name. So, I’m curious to hear you just talk about, like, if you had a handful of strategies, what would, what would they be called?
[00:14:24] What do they do? Like, what, what are the, what’s the overview there?
Strategies for Startups to Invest Their Cash
[00:14:27] Brad Silicani: Yeah. And maybe I’ll talk about that in, like, very practical or tactical terms and I’m just like what somebody could do to get started here. So, I think the first thing that I would recommend for, for business and thinking about getting started on investing, is investing in what’s called money market funds.
[00:14:41] So, those are highly liquid investments, meaning that you can get your cash out at any time, which aligns with that principle here of preserving cash and being able to use it for your business. And it’s also, you know, really high quality. So, within money market funds, you know, your options here are government market, money market funds which are backed by the US government.
[00:14:58] And then, prime money market funds, which are backed by corporations. And so, I think a really good strategy for folks to put into play is to establish a money market fund investment portfolio. And in doing that, there are some good tools out there with the banks where you can have access to a lot of different fund families.
[00:15:16] Brad Silicani: So, a fun family is like, think about each bank, maybe has four or five different types of money market funds. You want access to a bunch of different banks, to be able to pick and choose who’s giving you the best return. And a lot of banks will offer a money market fund, but, you know, to quickly move your cash over to, but it’s likely going to be a very limited set of options.
[00:15:34] So, finding a good platform where you can invest in a multitude of money market funds is something that’s, I find are really good at an effective initial strategy. And here, I would start employing the strategy, you know, maybe if you had $5 million of excess cash, or more, right? At that point, you know, it’s probably good use of time in terms of the interest income you’re able to generate for the amount of effort it’s going to take to put it in place.
[00:15:57] Brad Silicani: And that’s assuming, you know, the fed makes this interesting move here in a couple of weeks, right? So there, there is something to debate. And that’s a strategy that, like, is a good step one for a lot of companies. And one that continues all the way through to public companies. So, even at the large public company level, they’re still gonna have this type of strategy.
[00:16:12] Instead of this applying at the small end for all of your money, at the large end this is going to apply just to a set of your tier of your money, which you need pretty quick access to. The next strategy, to think about from there, is about increasing on duration, so the length of time that that investment is going to be outstanding while still keeping our risk in the, in the right place.
[00:16:32] Brad Silicani: And so there, the strategy, uh, that I like to put in play or would recommend, is thinking about some external investment advisors. And so, typically these, as it’s called a separately managed account strategy. And here in this strategy, what you’re going to do is you’re going to take a portion of your money and you’re going to hire a third party, investing for them, to be able to actually make decisions about which specific assets they’re going to invest in.
[00:16:55] So, here on, on the money market funds side of things you’re investing in a fund, which then invest in a basket of assets. On the separately managed account side of things, you’re investing directly in those assets. And again, you can choose the government route or the corporate route or a blend of the two and you’re giving directions to this third party, to be able to invest on your behalf.
[00:17:14] That is a strategy which produces significantly higher yield. I would say, if you want, you know, this is going to vary in, in terms of, you know, times in the market, but this is going to be like four to five X, the amount of return that you’re able to make from that money market fund strategy. And here, you’re going to say, “Hey, maybe I want to like a one-year average duration.
[00:17:33] I’m going to place 10 million, 50 hundred million.” Depending on, you know, what your balance sheet looks like. Um, and those advisors that are going to invest on your behalf and you’re going to earn that return. I would say, step two until I had a pretty confidence.
[00:17:48] Joe Michalowski: Yeah.
[00:17:49] Brad Silicani: I would not need that cash that I’m gonna allocate to this strategy, for at least, you know, like 12 to 18 month, uh, duration. Right? So, if my business is burning really quickly and I’m kind of always going back to equity raise, this is probably not a strategy I’m going to take. If my business is pretty stable or I’ve raised a really, a large amount of capital from, from my last round,
[00:18:09] then this is a strategy that, like, I would really consider pulling the lever on. there, to quantify that, I think that you probably want to think about 10 to $50 million is like the range of money you’d want to allocate there. And then, the other thing I’ll say about the separately managed account pieces that, you probably want to do that with a couple of different advisors.
[00:18:26] Brad Silicani: So, having two different advisors or investors, in there, really helps you then, like, the cycle performance, right? And is it investment advisor one performing as well as investment advisor too and making sure that they’re, you know, competing to really get that, that good return. And that, I would say, you know, for, like, startup through initial public company, those are,
[00:18:45] Joe Michalowski: Yeah.
[00:18:45] Brad Silicani: those are gonna be the strategies that you would consider. There are strategies beyond that, where you take some of that, you know, in-house and start doing your self-directed investments. But again, pairing that up with, like, when you’re going to bring in a Treasury team, I would not recommend doing that, you know, until much later and a maturity of your company’s life cycle
[00:19:02] because, you know, your team probably just doesn’t have the expertise on how to pick those investments where you can outsource that to those third parties.
[00:19:09] Joe Michalowski: Yeah. Even just hearing you talk about it, it’s like, this is absolutely somebody’s full-time job. This is not something we just, like, step in on for a couple minutes and we’re like, “Yeah, we’ll throw some money over there. And, like, we’ll, we’ll see what happens.” So, really appreciate the tactical breakdown.
[00:19:21] Um, every time I do one of these conversations and so you and someone like Ajay and Temi, that we talked, who we mentioned earlier, I’m always very impressed by how you all are able to break something down for someone like me to understand. I think it’s why anyone comes on and appreciates listening to these episodes because, you know, it’s what you guys do all day is go around to other departments and talk to people who don’t know finance and tell them about finance-related topics.
[00:19:44] So, really appreciate that breakdown. Um, very easy for me to understand which is, you know, not an investment guy. So, love that. So, you know, it’s sounds to me, like, when I think, like cashflow, like if you’re looking like a cashflow statement or like a balance sheet, like you…
[00:20:00] Brad Silicani: Hmm.
[00:20:01] Joe Michalowski: There’s obviously a very simple version where, like, if you keep everything in one bank, like, there’s not that much going on in terms of, like, where your money is coming in, where’s it going out.
[00:20:09] The more investment sort of strategies you put in place, I’m guessing the more complicated, like, your financial statements become and the harder it gets to maintain visibility into your cashflow. How do you handle that, like, what are the challenges of, like, just keeping an eye on all of this? Especially as, you know, you’re Anrok now, it’s just you, like, you don’t have a whole team. You don’t have a whole Treasury department. Like, what, what challenges do you face and just keeping visibility of all the things that are going on?
[00:20:36] Brad Silicani: Yeah, I think, you know, as the business grows, complexity definitely increases and becomes more and more of a challenge. And you’re going to want to think about tools out there to manage cashflow. So, again, if we go like to the end point, a public company, there’s things called treasury management systems and workstations that do, like, detailed analysis.
[00:20:54] But you’re not going to want that until much later in your life cycle. For where we are here at Anrok, I think, and for, you know, I would say if you think about going through even, you know, late, you know, series E and F companies, you know, this is something where you want to, or just take a risk approach that, like, “Hey, we don’t have a fully dedicated resource to do this.
[00:21:13] And we don’t want to take on that complexity.” So, make sure that the amount that you’re allocating to these investment strategies gives you plenty of buffer, to not have to look at it on a, like, daily or weekly basis. So, I like to think about like, let’s have three to six months of cash and just a checking account, which like, we’re not going to have a hiccup in the business where someone’s going to come ask me for money or we need to make a payment.
[00:21:35] And I’m going to even need to think about the investments. So, I think just hearing that out and thinking about it that way helps reduce a little bit of that to, like, ongoing complexity, to keep an eye on what’s going on. And then, at least a quarterly, you know, block on my calendar. I’m just like, “Hey, let’s go through each quarter.
[00:21:50] Brad Silicani: Take a look at what we did put it in these investments. How are they performing?” And like, “Do we want to make any changes?” And that’s part to, like one have a good eye and control on it, but to, also to, like, not actively invest here, right? Now, the goal is, like, passive investing. And so, you don’t want to be, on a daily basis seeing, the latest news from what’s going on in the world and reacting to that and, like, changing what’s happening in your investment portfolio.
[00:22:13] You want to, like, have a strategy which you’re comfortable letting ride for the long term. So, that quarterly check-in is a good way to, to help focus in and understand what’s going on there. As well, while I’m not being, like, too active on, on the investment approach here because again, you know, your goal for the business is to, like, protect cash, not to, you know, turn an outside at return there.
[00:22:33] Joe Michalowski: Yeah, not, not turning the finance team into day traders that are just…
[00:22:36] Brad Silicani: Yeah.
[00:22:38] Joe Michalowski: …moonlighting as people who, you know, do some planning here and there and whatever else.
[00:22:42] Brad Silicani: Prudent Stewards of the, the Capital.
[00:22:45] Joe Michalowski: Yeah.
[00:22:46] Stewards of Capital, that comes up all the time. And I’m a big fan of that term. I don’t know why it just really, really sticks with me.
[00:22:54] It comes up in most of these conversations and I’m glad
[00:22:57] that the finance community really takes that job seriously. And it’s really interesting to hear you kind of balance, like, maintaining that while, you know, putting these investments to work. And so,
[00:23:07] Brad Silicani: Yeah.
[00:23:08] Joe Michalowski: one thing that, that I, I’m not entirely sure is related, I know it came up in your message, when you mentioned like wanting to talk about this and it’s like how tax plays into this.
[00:23:18] And I know it’s what you all do at, at Anrok and so, I’m curious if there’s like, a way you can approach your taxes to facilitate some of this cash optimization? Does it play into the investment side, at all? Is it, like, a way you can free up some extra money to invest? Like, what, how does tax play into this?
[00:23:36] And is there any tip you have to sort of manage taxes that would then help out this conversation we’re having.
[00:23:43] Brad Silicani: Yeah, that’s a great question. And I think, like, overall the relationship between tax and treasury is, is a really tight one. You’ll see, often in larger organizations that they are even that combined organization. And I mean, I think the second part of this is, like, tax is a very broad term as well.
[00:23:57] Right? There’s 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, you know, sales taxes and other types of taxes, as you think about managing your cashflow. And so, you know, I think a practical tie in, for, you know, the small to medium-size tech company here, is thinking about how your cashflow as a business impact the amount of cash that’s in your bank account. So, a couple of examples here, it would be the longer that you allow your customers to have credit terms to pay you, the less cash you have in your account and the less cashier ruining return on. The faster that you’re paying out money, you know, the less money you have in your account and the smaller amount of interest income you’re able to generate.
[00:24:40] So, as you start to think about the like major categories of cash flows in your, your business, you know, clearly revenue is going to be a large one. And along with that, you know, is sales tax, right? Where sales tax can be, you know, 7, 9, 10% of, of a sale and that’s money that’s going to be coming onto your balance sheet and then out, eventually when you go to file and pay that, that sales tax return. So, any opportunities and abilities you have to kind of monetize on that flow, you know, will help you improve the amount of interest income you’re able to generate for your business.
[00:25:12] Brad Silicani: And then, you also want to think about that on the outflow side of things. So, thinking about just like, how, how, and when you’re going to pay bills and making sure to optimize that can also help you really improve, you know, what your, your cashflow situation looks like and commercially the amount of capital you have to invest and make that return.
[00:25:27] Joe Michalowski: Sure. Cool, love all that. Again, not, not a tax guy. Uh, so not to, I mean, I get, I got my tax returns out year and that’s the extent of my knowledge. So, again, uh, really interesting to hear you break that down. I think people listening will really appreciate some of the insight you gave.
[00:25:43] You know, one question I had, and you mentioned, mentioned earlier in the form of, like, a treasury management system, but aside from that, like, are there, are there tools that people can look at? Is there, like, some part of the tech stack that is particularly relevant for all the things that we’ve talked about, so far?
[00:25:58] Joe Michalowski: Like, is there something someone can put on place or is it more of just, you know, interactions with the banks? I know you mentioned, like, the tools that banks offer to manage different investments. Like, is there, is there anything on the market that someone can look at and say, “I’ll add that to my tech, tech stack and it’ll make my life easier on this front.”
[00:26:13] Brad Silicani: Yeah. It’s a good question. And I think one that, again, has, like, a range of, of outcomes here. I think the biggest challenge on managing your cash is just knowing where it exists. So, as you continue to grow your business, you will likely continue to grow your banking relationships. And that’ll happen
[00:26:30] just by, you know, one thing domestically, you were likely to add in a couple of different banks, as you think about needs across debt and equity and that will happen as you go internationally. And you may need a bank that has international or more robust international capabilities or simple
[00:26:43] Brad Silicani: capabilities in jurisdiction you’re looking at. Then you start adding in the, you know, the money market fund strategy and the other things we talked about. And you end up in a situation where cash is like in a bunch of different locations. And, and I think the biggest challenge is just trying to bring those things together.
[00:26:56] The Treasury workstation on the high end is, you know, a solution to try to integrate all of those things. I think on the, you know, a smaller to medium size end, it’s really focusing as you select your banking partners, you know, do that, have the ability to integrate into your GL, or, you know, is there another tool where you can integrate that at bank statement and banking information in one place,
[00:27:16] so you can get that consolidated picture of cash. ‘Cause as simple as it seems about, like, knowing where your cash. The situation becomes pretty difficult too quickly because each bank is going to have, like, a different reporting type, a different reporting frequency and you end up, like, spending a lot of time to consolidate those things.
[00:27:30] So, you know, I think, being conscious about, you know, what types of integrations those banks can offer natively to the systems that you have or other, other pieces of your FinTech stack is really important so you don’t end up in a situation where, you know, things are isolated off the side. And, you know, you may be only be focused in on 75 million out of your hundred, a hundred-million-dollar pie because, you know, 25 million of it is often this other system that, you know, can’t integrate or, or you can’t bring that information easily into your, to your system. So, I, I think, you know, given all the different pieces of a tech stack there, like thinking about “How I integrate to the GL, early?” is a helpful one.
[00:28:03] And then, as you continue to mature, you can think about other tools, like a treasury workstation as kind of post-public life, as well.
[00:28:09] Joe Michalowski: Gotcha. Yeah. I mean, pretty much all of our content talks about some sort of siloed tech stack disconnected systems. Like it is a, no matter who I talk to and what the topic is, it’s like, “Hey, what are the challenges?” And that always seems to be finances, a thorn in the side. And so, like I said, this is a, this is a new topic for the podcast.
[00:28:28] Something we haven’t talked about, like, in any Mosaic content. Not totally shocking to me that this boils down to like, there’s a lot of different system. There’s a lot of different areas that things are at. And like, you got to bring it all together. You got to have visibility. So, not shocking.
[00:28:43] Brad Silicani: Yeah. Yeah. It’s the quarter, quarter answering what’s going on with your business. Right? And cash is so fundamental that you got to solve that problem to make sure you’re effective.
[00:28:51] Joe Michalowski: Absolutely. So, we, we’ve been talking for a bit and I don’t want to take up too much of your time. There, there is a question we ask every single person that comes on. Um, selfishly, I say it every time, my favorite question because it kind of zooms out from a lot of the tactical stuff that we’ve been talking about and get some insight into careers and things like that.
[00:29:09] And so, I will ask it to you, as I do for everyone. What is one thing that, you know now that you wish you knew back when you started your finance career?
Finance Career Advice from Brad Silicani
[00:29:17] Brad Silicani: Yeah. That’s a good question. For me, I think maybe it would kind of mirror what my career has been, which is, you know, very early on when I started my career, as I mentioned, I was at Ernst & Young and in accounting. And I was very focused on doing everything and learning everything that accountant needed to do.
[00:29:33] Right? And I was in environment where I was completely surrounded by accountants. And when I went to Dropbox, I think in my first couple of weeks there, um, it was this, like, big shock that some of the things that I took for granted in terms of the terminology I used, the perspective I took on things.
[00:29:48] The way I wrote even emails or communicated to people did not resonate with the rest of the company. And it was the first time that I had worked with engineers and people in sales and all these people who, who just work in an accounting background. And I rolled forward that experience to where I am now, where I manage a sales organization, manage lots of things outside of finance.
[00:30:05] And my advice to myself back then would be, like, “Early and often, and, and continually through your career, try to not be a finance person. And that doesn’t mean that you have to, like, take a role that’s outside of the finance organization. It’s about putting yourself in the position of the people that you’re trying to communicate with.”
[00:30:22] And, and, taking the perspective of what does the salesperson going to think about, you know, the communication and priorities that, that I want them as a finance person to have. What is the engineer going to think as I go to present them with this new tech, you know, a solution or something that I need implemented, right?
[00:30:37] Brad Silicani: And being able to put yourself in their position, to understand, empathize with their needs and communicate in ways that are gonna resonate with them will make you a tremendously more successful as a finance person. To then be able to bring that finance message to those people and have them engage and understand, appreciate what, what your objectives and goals are.
[00:30:55] So, I think, you know, trying not to be a finance person, whether that’s, you know, trying a role outside of finance or even just putting yourself in that role where you can empathize and communicate with others is super critical, in my opinion, to making a really strong finance organization. And I’ll give R.J. credit.
[00:31:10] Brad Silicani: “I think you did a great job with that and our time there at Dropbox.” And so, yeah, something that I like to tell finance folks to try as they continue in their career.
[00:31:19] Joe Michalowski: I love it. You’re absolutely right. I think R.J., if I go back and listen to the first episode, I feel like he’ll probably have a similar answer. Um, and it is definitely something, I can see a very similar skillset in you. I mentioned earlier, just like, this ability to talk to someone like me and, and explain all these things in terms that, that everybody can understand, not just like throwing spreadsheets at people and saying like, “Hey, here are the numbers.”
[00:31:40] Like, “Go figure it out.” And so, yeah, I think you’re, you’re spot on and absolutely something that you can tell it has, like, the R.J. influence a little bit there. Um, I don’t, I don’t ever do this but I do want to, I want to zoom back in for a moment. Do you have, like, one tip for, so this comes up a lot, like, like being able to collaborate, do you have, like, a, a more tactical tip to actually making that empathy, that more empathetic side of finance, like, part of your daily job, like, is there something you do that makes that easier or is it just like conversations with people? Like, what, what can people do?
[00:32:10] Brad Silicani: Yeah. It’s a great question. And, you know, you kind of teed it up but, but I do think it’s, it’s conversation and, and relationships, like, I think that in finance, we often think of, like, a very tactical set of things after it happened. We need to close the books, we need to produce a forecast. We need to process the bills.
[00:32:25] We need to do those things. And, without a doubt, those are like super critical parts of the role. And maybe there’s more advice for me as a young, a younger professional, which is like, those things are important, but like the relationships that you have are going to carry you even further than that, right? Carry you beyond being the, like, tactical person who can accomplish those to the leader who can, like, push those things forward.
[00:32:44] And so, I think that investing in relationships is super critical to success. So, being able to have that, you know, one on one coffee chat and picking the people who are just, not clearly part of your normal workflow will be the most valuable relationships. So don’t pick those people who like, okay, this is the salesperson who I give the sales report to and I’m going to naturally talk to them.
[00:33:03] Or, this is the IT or engineering person that I need to, like, help set up my NGO. Find that person in your company and in your broader organization, who you don’t have that natural relationship with, in terms of your workflow. And that’s the type of relationship where you can engage and understand what they need because there’ll be no, you know, transactional purpose to that relationship.
[00:33:24] So, you can really get to the essence of understanding from them, like, “What’s important to them? Why do they prioritize it? How, you know, can you land messages best with them?” Which will help you tune those other relationships really effectively. And then, also you’ll come across a situation where it’s like, “We came across a problem we didn’t expect.
[00:33:41] And now, I have that relationship, uh, where I can really save my organization and receive what’s going on, by leveraging that relationship that I’ve spent the time to build and invest in. And now it can come to fruition to help everybody when here.” Um, so I, I do think it’s a, it’s a lot of relationship basis and getting away from tasks that the finance organization needs to focus on to the relationships.
[00:34:01] Joe Michalowski: Yeah.
[00:34:02] That non-transactional relationship feels like the crux of it. And, you know, I get a lot of value out of that from, from my job. And so, can definitely see how that would benefit anyone in finance, too. And I, you know, I, I like this ending on this question because it kind of zoomed us out, like I said, and I think it’s a good place to kind of start wrapping things up.
[00:34:22] I love this idea the, the tip is great. So, anyone listening, find somebody in the org today or tomorrow, go talk to somebody that you have no transactional relationship with and see where it takes you.
[00:34:33] So, Brad, uh, I just want to say thanks again for joining, but this is your time to shine. Where can people go to learn more about you and Anrok?
[00:34:41] Anything you want to plug? It’s all yours.
[00:34:44] Brad Silicani: All right. Great. I didn’t know I have the plugging opportunity here. Um, yeah. If you want to find out more about me, you know, feel free to shoot me a note on LinkedIn. I’m happy to connect and chat with folks about anything across, uh, what we talked about here or if I can share, you know, other parts of my experience here in Dropbox. On the Anrok front, you know, Joe, you did a nice introduction at the beginning,
[00:35:02] what we do is we have a sales tax platform that helps support SaaS businesses, really identify when and where they need to comply with sales tax, which hinted the answer is there, early in your life cycle and then deal with the burden of that ongoing compliance by helping them execute on tax calculations, returns of filing.
[00:35:19] Brad Silicani: So, if any folks out there need help on that front as well, please check us out, Anrok.com and we’ll be happy to have a conversation there and see how we can help support you.
[00:35:27] Joe Michalowski: Awesome. Well, Brad, thank you again for joining. This is a really great conversation. I think people are really gonna like all the advice you gave, um, just appreciating you spending time and thanks again for joining The Role Forward.
[00:35:38] Brad Silicani: Yeah. Thank you. Appreciate you having me and enjoyed the conversation here today.
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