In this new blog series, Hokodo’s VP of Finance Aman Mehra interviews the Finance Leaders from some of Europe’s leading B2B commerce businesses to learn about their experiences of using technology to improve processes, drive growth and ensure their team keeps up with the pace of digital transformation. In this instalment, Aman sits down with John Dalrymple, Chief Financial Officer at Taveo.
Aman: Hi, John. I’m really excited to be speaking with you today. Could you kick things off with a little bit of background about yourself?
John: Well, thank you. It's very nice to be here. We were on a panel a couple of days ago which was very enjoyable and it's good to see you again. A bit about me: I’m based up in sunny Glasgow at the moment. I’m a practice trained accountant and have held very senior financial roles across a number of industries, including financial services, oil and gas and B2B SaaS. I'm always keen to expand my network and expand my horizons and offer insights where I can so I'm looking forward to this.
You’ve got a real breadth of experience in different industries. If you think about being a senior finance leader in those sectors, what are some of the biggest pain points that you've faced from a finance perspective?
Fortunately or unfortunately, depending how you view it, I have had a lot of challenges throughout my professional career, which is what you would expect as you climb through the ranks.
"I would say the pain point that is constant, no matter if it’s good times or bad, is cash flow management. Either it's the struggle or it's the question of how you deploy your capital. Cash flow management is definitely one that spans across all sectors at all times."
Another one is the efficiency and effectiveness of your finance team. How do you balance individual aspirations with company goals and objectives? How do you balance that with getting that sweet spot between helping your team develop and treating them like you don't want them to leave but also giving them the opportunities and skills for future roles? That has always been a goal of mine and trying to find the team that works well and efficiently with you is always a challenge.
In each of those industries you’ve been in, I imagine you have different cash flow pain points. For example, in terms of digital maturity, I imagine financial services could be different to oil and gas. Can you talk through that? Are they all at the same level for how they manage cash or is it different across industries?
I think it ultimately depends on the history of the business and what you're dealing with. My experience in oil and gas was a family-run business that had roots in the 1800s and as they diversified their portfolio I joined the oil and gas division. I had a century of history and process already set up that went back way, way beyond my time. That obviously creates issues with systems and expectations.
Whereas recently I had a CFO position at a B2B SaaS business and that's the opposite. It's a blank canvas and you can build your finance function to be cutting-edge from the start. From a technology and efficiency perspective it's the best for implementing the various tools that you want. So, it is totally different.
Ultimately, no matter what you're doing, the end point is maintaining a balanced working capital for that business and to achieve its goals. In the case of B2B SaaS, it's obviously licensed growth, company acquisitions and enhancing shareholder wealth. By no means are either easy or difficult, they just have different cycles. Oil and gas has a worldwide scope and some of our customers were Q4 heavy and based in overseas territories so you're facing that cash flow pressure of all your cash earned in one quarter and held in an overseas entity. How do you expand? How do you bring that back into the UK? And you’ve got to think about the management of overseas banks, overseas tax. That's complicated and requires different cash flow planning
At the B2B SaaS business, we were dealing with some large FMCGs. Their processes and procedures are so regimented that you, as a small SaaS business, can't change them. They’ll be outsourcing their way, offshoring their finance functions to whatever location they want. Even if you're dealing with a marketing team or a UK-based team, ultimately the financial control is based elsewhere and it's very decentralised. So, you can negotiate your contacts, you can negotiate on price and you can increase your revenue, but they won't budge on their set procurement terms if they are group policies. If they want 90 day payment terms, you can argue and you can try, but it's a losing battle.
I found that it was more effective to negotiate on price than it was to negotiate on payment terms, which is good from a B2B SaaS perspective. We were backed by VCs and high-net-worth individuals and it was all about recurring revenue growth, which was good. But that cash flow lag was always a bit of a worry because I wanted payment as early as possible. It's all about picking your battles and planning accordingly and as effectively as you possibly can.
We’ve talked about the importance of cash flow and trade credit. Can you tell me more about your experience with offering payment terms to customers? What are some of the pain points you’ve faced in that area?
We had our standard preferred terms, which were 30 days. The issue that you face in B2B SaaS, particularly when you're investor backed and you're not bootstrapping, is that your valuation is based on recurring revenue.
If you are negotiating with a customer, you've got two conflicts in your head. You have to ask, can I maximise my recurring revenue from this deal? And can I maximise the speed with which the cash will clear in my bank? And you will not always win. You have to be pragmatic in those situations and, more often than not, because of the customers and the B2B commerce space that we were dealing with, the negotiation can be very difficult when it comes to payment terms.
And actually, we tried a couple of times to negotiate. We're talking about some of the largest FMCGs in the world. When I first came in, I thought maybe there’s a chance we could renegotiate with some of these guys and we can get paid a bit quicker. But I quickly realised it was a bit of a losing battle!
With those types of customers, budget holders are often separated from the procurement teams by a huge degree. So trying to communicate with the person in charge of the money via the procurement person would draw out the signing process and delay revenue and cause problems from a shareholder value perspective.
"When you're taking the risk of increasing 30 days to 60 days, that's the difference between making payroll or not. That was always my biggest fear: not having the money in the bank to pay everything at the end of the month."
In those scenarios we had to concede on payment terms for the overall greater good of the business. But that required in-depth knowledge of cash flow projections, because when you're taking the risk of increasing 30 days to 60 days, that's the difference between making payroll or not. That was always my biggest fear: not having the money in the bank to pay everything at the end of the month.
I think when you tell a non-finance person about payment terms, none of that pain that we just talked about comes through. In a previous conversation in this series I spoke to Jorge Nasta, Head of Finance at SolarMente and he said something that really struck me: “not every deal is a good deal.” Because revenue isn't cash and cash is what moves your business. And the other thing there is the amount of time it takes on the negotiation. If you're thinking about scaling a business do you really want your team spending all their time negotiating payment terms?
Exactly. I look at both my own hours and my team's hours and I always think: one, what's the best value we can get out of the finance team as a collective for the rest of the business? And, two, how are they from a job satisfaction perspective?
I want people to enjoy coming to work. I want people to be motivated. I want to be motivated and enjoy coming to work. Having your staff and yourself negotiating and fighting a tough battle might sometimes work out, but not always.
So it’s about being pragmatic and confident enough to say, what is the most amount of hours we can spend on this task to get the best result? And then move on, because negotiating payment terms, spending days, weeks, months on it, no one else in the business will notice it. You'll end up getting frustrated. Your team will get frustrated. The other side will get frustrated.
And for what? You want to go into relationships with your customers or your suppliers in the best way possible. And look, perhaps that’s a naive view. I admit that not everyone's set up that way. But if you're getting that feeling from your counterparty, do you want to be working with them in the first place? The answer's probably no.
People in our field tend to focus on the numbers, but you can’t discount the relationship piece. When things do get tough, that can be the difference. If you have a good relationship, you can get an extra week to pay and you can make payroll and solve your problem.
Finance as a profession has changed a lot compared to even when I started out. If you look forward now, we're hearing about the changes that things like e-commerce and AI are going to bring. How do you see your role and your team evolving over the next few years?
As a whole, I think the days of repetitive tasks in the finance function are largely coming to an end, which is of no surprise. The days of the finance professional working in isolation in the corner are dwindling, which is great.
"The role of the strategic advisor and the business partner throughout all areas of business operations is becoming the forefront of a career in finance."
And I don't mean that just at a CFO level, mean from the CFO all the way down to those at the start of their journey. And that's fantastic. It's fantastic from a development perspective in enhancing the role of finance, but it also creates training and development challenges across the board.
I said it on the webinar we were on the other day: tools are great and can make your life easy, but if you don't know what the tool is doing, you're actually setting yourself up for a fall further down the line.
So then the day-to-day becomes more interesting because it places more emphasis on the importance of good quality training and the fundamentals and basics of being a finance professional. Even down to things like Xero or Dext: they can do your double entry bookkeeping, which is good – but it’s also dangerous if you don't know how it works. Therefore actually having foundational knowledge in the area of finance that you're focused on becomes paramount. For me it’s about understanding your team and helping to bridge those gaps and offer in-house or external training as a solution.
In finance we say “garbage in, garbage out.” If you don't understand the data that you're putting in, then you put it in a black box and it spits out numbers which you can’t understand. It becomes very dangerous to run your business that way. And then with the evolution of data, technology and integrations, we’ve gained a lot of automation efficiency, but if you think about the level of talent that is coming through, perhaps the curriculum hasn’t caught up. There's a gap there which we have to close through training.
Thank you so much for taking the time to chat with me and share your experiences today, John!
If you would like to learn more about the ways in which Finance Leaders are overcoming the challenges of digital transformation in B2B, download Hokodo’s investigative report below.
