What Cash Management & Basketball Have in Common - Secrets of the ‘Stephen Currys’ of Finance

Joseph Drambarean: Welcome to FinTech Corner. I’m Joseph Drambarean. I’m your host. I’m the Chief Product Officer here at Trovata. And we are so excited to be joined by Kevin Bell, our Head of Client Solutions. Thank you, Kevin, for joining us. I appreciate it.

Kevin Bell: Yeah, absolutely. It feels like we’re just in the living room hanging out. It’s an honor to be on the show.

Unpredictable super bowl

Joseph Drambarean: Speaking of living room and hanging out, I wish I could have hung out with you and watched the Super Bowl together. It turns out that it was an exciting Super Bowl. I’m not sure. Who did you pick? Did you go for the Chiefs or the Eagles this year?

Kevin Bell: Yeah, I was certainly rooting for the Chiefs but I thought the Eagles were gonna take it. So I was pleasantly surprised to see the Chiefs pull through. Mahomes is a likable guy. Even as much as he’s been successful, you still kind of like the guy. And on the other hand, no offense to any Eagles fans out there but, being a Vikings fan myself, it’s not a super fun relationship.

Joseph Drambarean: You know what’s funny, on the topic of unpredictability, just generally, and what’s been happening in the marketplace, it’s funny that this weekend was a microcosm of all of the possible unpredictable things that could happen in a weekend, all happened. Not only was the line just insane with regards to the Super Bowl, Mahomes had an injury, everyone was counting him out, it was like, “Oh, the Eagles are gonna win for sure.” So if you bet on the Chiefs, you probably made a killing over the weekend. But then not to complicate matters further, oh, I don’t know, we were shooting down identified objects all throughout the weekend and people were like, “What’s going on? Should I be watching the Super Bowl?”

Kevin Bell: Yeah, that was a bit bizarre, for sure. Seems things have settled down, but.

Joseph Drambarean: Thankfully. But it’s not helping, I guess, just from an atmosphere, and generally, just the feelings of what’s going to happen throughout the rest of the year. Are we going to have other swings, in terms of tech stocks, and just generally as companies have had to navigate liquidity in a more precise way? I guess that’s saying things in a very friendly way.

Kevin Bell: Very diplomatic way, yeah. Absolutely.

Market madness

Joseph Drambarean: Yeah. But, obviously burn is extremely top of mind for so many companies, not just within tech, but just all over the place. If you’re in advertising, if you’re in manufacturing, what’s been happening overseas and conflicts that are playing out in Asia and in Europe. It’s impacting just the predictability, generally, of how we operate our businesses. And I’m just curious, you get to see a lot of the conversations at Trovata around managing cash and what it means from analyzing that cash but also understanding where it’s going. What are some of the trends that you’ve been seeing? What have been some of the focus points for some of the customers that we’ve been working with and just things you’re seeing generally?

Kevin Bell: Yeah, it’s a great question. I think what’s been interesting is beyond just the last six months or so, even going back the last three, four years, it’s been pretty tumultuous, to say the least. First, we have a global pandemic on our hands, and then rather than things tanking for too long, in fact, it was a pretty positive environment for most, especially in the tech sector. Money was easy to come by, funding was everywhere, stocks were going crazy. And now we’re in this environment where it does feel like everyone’s waiting for the other shoe to drop a little bit and have started to see that. Every day you’re on LinkedIn and yet another organization is announcing a significant layoff. And so I think the tension is a little bit high. And I think it’s all the more reason as we talk to finance and treasury professionals, there’s a microscope on cash from the top levels of the organizations So the ability to have that view, really understand what’s coming in, what’s going out, how do we predict where it will be over the next couple of months, let alone weeks, is more important than ever.

Really, Excel?

Joseph Drambarean: Yeah. One of the things that I always am struck by is the tooling that this kind of profession has at their disposal. The first day that I ever had an opportunity to learn about this space — at this point it’s like seven years ago, yeah, I think it’s seven years ago — Brett told me, almost the business case if you will of like, “Would you believe If I told you that a majority of finance professionals in treasury and finance operations if you’re in even the C-Suite, that the way that you manage your cash isn’t through some fancy tool, it’s all done in Excel. The first time that I heard about it, I definitely didn’t believe it. I thought that he was exaggerating. And I can say now, definitively, after having done this journey — for, at this point, almost seven years, us together, we’ve been doing it for a few years now, as well — it’s wild to see that there’s still just a dearth of available tools that give you this kind of clarity. Traditionally, you would think that, well, it must be the ERP system. Of course, the ERP system, which solves world hunger, it does all these things for you. How could it not give you visibility into this? And then we find out, well, it’s actually a lot harder than you would think, getting that data into an ERP system, if at all. And then you start to ask, okay, well, where else could you get it? Then you look at, obviously, the bank portals, that’s where a lot of folks are going to find out about their visibility. And they do a lot of manual effort. And one of the things that I’ve been curious about for a long time is just, what do you hear in the field, if you will, from customers? And the experiences that they have, is it truly as bad as it sounds? That we’re still in the stone age? It’s not to say that Excel is the stone age, I actually love Excel. I use it still. I am using Google Sheets more often than not nowadays, but the concept of using a freeform spreadsheet is one of the most efficient ways to do ad hoc work. It’s just not scalable. The moment that you have to automate anything, it’s like, oh, God, I have to share this with somebody? What if they changed something? What if anything breaks?

Kevin Bell: Well, first of all, I have to echo my surprise as well. Joining Trovata a year and a half ago now, I absolutely could not believe that this was how organizations were functioning primarily. One of our newest employees out of Sydney, he used to be a treasurer, himself, and he still has the 15 or so dongles that he needed to log into the various bank portals multiple times a day to drive at cash positioning. It’s just shocking that that was ever a solution and still is a solution. But what’s interesting to me is I think it’s one of those many cases where you see the corporate banking world trying to catch up to a consumer banking experience that everyone thinks has already been solved with things like Mint, Personal Capital, other aspects like that. And it’s shocking that these giant organizations bringing in hundreds of millions or billions in revenue have less of a view of their own cash than average Joe does of their monthly budgeting. It was pretty shocking, and I think, again, in the context of today’s economic conditions, it was like, well the actual profitability and necessity of cash wasn’t all that much of a concern, which is a great problem to have. But even hearing large companies like Dell or IBM still managing cash in spreadsheets, as of a year or two ago, it’s just shocking. So I think all that is to say, there’s more and more interest in a better way of doing it, even if so many of those practitioners are still most comfortable in Excel.

Joseph Drambarean: Yeah. My reaction the first time I heard it — I bet you were in the same boat — was, why? What is it about the problem that makes it so difficult? And we’ve obviously hyper-analyzed this over the years, and we’ve tried to come up with all kinds of short-form answers to it. But I think it’s the basics right. It’s that the banks and also the tools don’t talk to each other. And they talk in different languages if they were to talk to each other. And so consistency is a really big problem. So instead of dealing with that, a lot of folks would rather just brute force it. It’s, “Hey, Tommy, hey Janet, good to have you do this project, and you’re gonna do it every single day or week. And you have to log into this bank portal, pull down the data, fix it, and then I want you to do the math of what’s our position.” And that’s wild to think that you could be IBM or Dell, and you could also be us, Trovata, and have the same problem. Imagine from our perspective, it’s way more consequential than for Dell. Like you said, for a large organization, the value is moving up and down by a few percentage points over the course of a week. They could be meaningful and material, especially if there’s a huge tech sell-off happening, as happened earlier this year and last year, but imagine when you’re a smaller company or if you’re a high-growth tech startup where runway is extremely material when you’re considering burn on a daily basis. So let’s play that exercise. Let’s say that I’m sitting at Trovata and I need to find out, hey, we’re trying to calculate our runway, our exact runway, given our expenditures right now, and I want to keep an eye on it every single day. What would we do? Would you literally have to go chase it? And then the other thing that always is a shocker to me is that’s the most basic calculation. How about getting intelligent about where the money is going, right? So I’m just curious. First of all, I’m curious to hear your take on this. You’ve gotten a chance to train so many customers, be in the thick of it. You’ve also done tons of sales demos yourself so you’ve had a chance to hear from prospects. Is this real? Is this something that customers have as an issue today?

Manage cash smarter, not harder 

Kevin Bell: Absolutely. I don’t know how to emphasize it strongly enough. I think almost everyone we speak to, even if they feel fairly comfortable with their current process, there’s that recognition that there’s got to be a better way of doing this. They’re spending a lot of time on the manual effort side. It’s not something that people really want to be doing, it’s just considered something they have to do. Spending hours a week compiling the data, even getting it to a place where you can start to do some of the positioning or analysis that you mentioned. And so, I think it’s been that initial data problem you touched on has been seen as this mountain that was too high to climb, this problem that was too challenging to solve. And again, as I mentioned, some companies being able to not worry about their cash all that much in high times. The banks have been a little bit too comfortable themselves, in some cases of not necessarily having a need to provide innovative technology. They know that those relationships are already sticky, they’re not necessarily going to lose customers or be driven by the same type of experience or need for technology that we see in many other industries or as consumers. And so, that’s played into it, too. We love the banks, they’re crucial to our operations, absolutely, but being able to start with that direct feed of information into a modern platform is such a big headstart on how we hear most clients working things out today.

Joseph Drambarean: Okay, let’s say that we were to wave our magic wand and solve this problem — and I’ll be honest, one of the reasons we even wanted to start FinTech Corner is to try to evangelize the fact that there are better ways to operate and that if we could come together as a community and start to talk about those ways and start to innovate, maybe we could make the lives of folks in finance and in the treasury and other departments that are involved in the operations of cash, a little bit better. Dare I say it, delightful. I always feel worried about bringing the idea of the light into the daily life of a finance professional, but I truly feel that way. You should love the work that you do. And if software is a major part of that, shouldn’t you love the software that you work in?

Kevin Bell: Everyone deserves to enjoy their job as much as you do sitting behind writing some code.

Joseph Drambarean: So let’s say, let’s say that we waved our magic wand and connectivity, just generally, integrating with bank connections, was not a problem anymore. It was solved, and you could have that data. What are some of the things that you would recommend that an operator that’s sitting either in treasury or maybe even when we look a little bit further down at the owner-operator that’s trying to get their arms around cash, what are the types of things that you would do, assuming that you have that holistic unified connectivity? For example, “Oh, man, here it comes, here’s the plug.” What would happen if, for example, you join Trovata for free today —

Kevin Bell: How about that? Yeah.

Joseph Drambarean: “This podcast is, of course, supported by Trovata. Please feel free to connect today and join. We have an amazing product and we would love for you to experience it. Check out our website Trovata.io and join today. And what you will get out of that is the ability to connect one bank for free and get to try a few of our features that we consider some of our favorite balances, transaction search, and being able to navigate that, and then analytics. So using that as the frame of reference — we’ve just waved our magic wand, we solved your connectivity problems — what are the types of things that you would be focusing on as your first-order activities?

Back to the basics

Kevin Bell: Yeah, I think there are a couple of things that come to mind. One, this sounds so basic, but being able to group your various accounts at the utmost level to have that automated view — by entity, by region, by division level, reporting. Again, sounds incredibly simple and really should be, but it’s amazing to me how much of a painful exercise that can be if you don’t have tooling like this in place. So that’s one thing for sure that’s certainly the most low-hanging fruit of getting started with Trovata, I would say. The other aspect is more looking into the transactions themselves. And whether you’re an organization that has a pretty good handle of, what are those categories that we would expect to see, in terms of cash flow? Is it payroll? Of course, that is pretty common, if not required across every organization. Taxes. Things like that, that aren’t unique to a specific industry or business. Or other industry-specific types of cash flow, such as tuition is one that always comes up when we talk to higher ed institutions, for example. And every industry, every organization has those unique cash flows that they may or may not be aware of. Being able to use search capabilities like we all expect to be able to do on Google, or dare I say, Bing GPT. The ability to search and be able to use that natural language search capability to drive automated categorizations. That’s something you can get a ton of value and insight into, being able to start to see what those cash flows look like. Or even if you’re not as certain or not as aware of what those cash flows might look like for your organization, or you just want to see it at a more granular level, then then you might be able to predict leveraging AI to have some of those categories recommended or setup on your behalf as you get into the solution. So again, defining what those cash flows are, being able to start to measure them. And then it all becomes, what insight can we derive from that type of reporting?

Joseph Drambarean: it almost feels like the basics. If you boil them down the basics are, “Where are our accounts at? Where’s the money going or coming out of?” Number one, how could you not know that? Number two, now that I know that, where specifically, out of those accounts, is the leaky bucket going? If money’s draining out of these accounts, can I put a sticky note next to each of the holes and be like, This one’s payroll, it’s a big hole. This one is credit card. This one is our vendors. This one is … etc., etc. And it is wild to me that it is an exercise like that is so hard to do if you have to do it by hand. I guess we’ve just gotten used to it. Years of having this kind of software at our disposal, we’ve gotten used to it. I’m really passionate about this because I feel like we could actually change things in this industry if the basics were done at an elite level. To use a sports analogy, if you have a team, say it’s a basketball team, and you’re trying to get that team to improve incrementally like 10% to 20%, you wouldn’t start by teaching them to try to dunk off a screen role play. You’d focus on, “Hey, can we all handle the basketball? Can we get across the half-court line and not have a turnover? Can we all play defense and keep our positions?” With regard to bank data especially — transactions, balances — we all just need to learn how to do the basics, and everybody be at the same level, and we don’t even discuss this anymore.

Kevin Bell: Yeah. I would take that even further and say it’s the layup. If you follow the basketball analogy, it’s what should be the expectation, it should be the easiest part of the game or the exercise,

Joseph Drambarean: Right. And I feel like focusing on this, you graduate into screen roll, fadeaway threes, you know.

Kevin Bell: Did you play basketball JD?

Joseph Drambarean: I did. My height would not indicate that I did, but yeah, I’m a big fan. Shout out to the Golden State Warriors, I love them. So yeah, I guess the takeaway for me is if you’re in a position where liquidity matters to you — especially if you’re in tech right now, it matters a ton, and having your arms around burn, having your arms around operating efficiency — you can’t really do any of those things if you don’t know where your money is at and where it’s going. How could you possibly make a decision around efficiency if you don’t have a good categorized playbook of, “This is where our money is going today?”

Kevin Bell: Yeah, absolutely. And I think it goes both ways, too. For organizations that are seeing those hard times and having to tighten the purse strings a little bit, it’s ever more important to have visibility and even be able to project what we expect things to look across various scenarios as we go out over the coming weeks and months. And then for organizations that may be in a more fortunate position that still have quite a bit of cash on hand, how can they take advantage of the higher yield available in today’s environment to continue to let that money work harder for them?

Joseph Drambarean: Well, that’s interesting. I think a lot of the time, we focus on the downside of not managing your cash effectively. That’s very interesting that you bring up yield because, obviously, when we see it from a consumer perspective, we see interest rates have gone up and I think, well, there goes me buying a house.

Kevin Bell: Well, yeah. I just fell back very painfully with a first home purchase of my own, so.

Joseph Drambarean: Well, congratulations. That’s amazing.

Kevin Bell: Thank you. Thank you. But it was not fun on the interest rate side, that’s for sure.

Joseph Drambarean: Okay, so you said for those that are fortunate in the sense that they are operating a profitable business, they are in a position where excess actually is a strength at this point. For those of us that don’t know anything about this, what does that mean? What would you do if you knew that you had a certain level of excess? Why does that matter?

Level up your cash strategy

Kevin Bell: Yeah. I think first and foremost, it’s about being able to identify how much excess do I have and across what duration. So again, coming into Trovata and being relatively new to treasury, I didn’t realize, like, hey so much money is moving around on a daily basis across these organizations that it’s really all about trying to understand how much do we need to have in the bank to meet our obligations today? Or do we need to make a borrowing decision? And so, being able to identify what is that delta of what our obligations are, what our cash needs are, and what we have available, and then being able to put that to use in short-term investment-type properties.

Joseph Drambarean: That’s awesome. So, is that something that’s going on? I guess that makes sense when you think about it because it’s the inverse. So you got hit on the mortgage side, but if you’re on the business side, you’re getting yield. And the advantage right now is that it’s the inverse effect of interest rates going up means that you could get into a checking account even, for example, and be making interest. So is that what you’re getting at, that ultimately you are incentivized to identify these excess pools of cash because you’re leaving money on the table?

Kevin Bell: Exactly. Yeah. When rates were much lower, organizations didn’t see it as worth the exercise. But with today’s rates, it’s a totally different story, especially when we’re talking about such large quantities of money. Those percentage points add up pretty quickly and it can be very meaningful for organizations. So yeah, again, that’s on the investment side. But, again, there are two sides to every coin. Being able to have that understanding of what’s coming to even provide one additional day’s notice on how much you need to borrow, for example, can be very meaningful and valuable to organizations too, and results in a lot less cost of borrowing that money.

Joseph Drambarean: So a lot of this is just, first of all, get smart on cash. That’s the number one takeaway. How could you not be? And in fact, if you’re not, join today, please. Take advantage of our offer. Item two though, this is interesting, it’s having this nimble, almost opportunistic freedom of being able to react on — we’re not saying real-time basis, although in some cases it’s possible, it gives you leverage. Because if you can react more efficiently in a more real-time manner, you might be able to take advantage of interest rates from a yield perspective, or you might be able to borrow more intelligently. Do it in a way that is giving your business leverage and not overborrowing, as an example, but taking advantage of exactly what you need and being able to make precise decisions. So it’s interesting that there is a continuum of advantage. The most basic is, how could you not have your arms around this? — number one. Number two is, well, wait a minute, if you do have your arms around it, now you can all of a sudden be playing offense, you can be more strategic. Is there anything left in that continuum? Using our basketball analogy, we can dribble now. We can do layups, maybe we can shoot some threes. What is the running a picket roll or triangle offense? What is that version of best practice? Where do you have this as your platform and you’re sitting on this capability, what do you do then?

Kevin Bell: I think there are so many possibilities for organizations. But, again, you can’t measure what you can’t see. So, having that information, and now being able to not only report and drive some of those insightful decisions that you talked about, but start to forecast from this information. So I think the forecasting in the context here is the three-pointer, although Steph Curry makes that look like a layup so maybe we have to exclude him. But forecasting is that little bit more hairy, complex challenge that almost everyone wants to be able to do a great job of but there haven’t been a lot of great tools out there to help facilitate it.

Joseph Drambarean: So it’s almost like the Holy Grail then. Once you have your arms around everything, you can start to predict the outcomes with more precision. And that would influence whether or not your behavior on yield and debt management could play out even more efficiently than doing it on a daily basis. It’s like, the ultimate form of strategy is how much advance notice can you get on all of this?

Kevin Bell: Yeah, absolutely. So we’re seeing organizations not only want to go to that 13-week forecast that’s been bread and butter for most of them but can we look at a 12-month forecast? And how do we incorporate scenario planning as well? That can be so cumbersome if you’re doing this the traditional way in Excel. Incorporating variance analysis so we can improve our forecasting going forward. So, again, a little bit of a shameless Trovata plug in some of these aspects that we help solve for, no doubt about it, but they’re just challenges that we hear over and over and over again that come up in nearly every client conversation.

Joseph Drambarean:At the end of the day, the vision of this podcast, really the conversation that we’ve been having so far is we just want to help evangelize better practice. You don’t have to be doing this by hand. You don’t have to be struggling in the dark shadows of your corner office. This can be fun. And we hope that a lot of the things that we discussed today can be taken advantage of. But, obviously, we were not going to pretend to wave our magic wand and solve every problem. But yeah, I think this has been awesome. I’m really curious to see what the reaction will be to some of these insights. We would love to get your comments. Our podcast is also available on YouTube and other platforms. So if you have ideas or questions about any of the things that we talked about today, it’d be awesome to hear from you guys, whoever’s listening, and we’d love to dig into it further. We actually have a Slack channel that we recently launched. It’s called The Trove where we manage a community of customers and other folks that have joined, that ask similar questions where you can get further resources and all of that. And we’ll leave a link to all of that in the show notes for you guys to find it. But yeah, Kevin, this has been sick. This was an awesome conversation. So, Minnesota, I have double-clicked on this. Not to say that I don’t love the Midwest, but there’s one thing that I have to address.

Kevin Bell: I can’t imagine what it would be.

Joseph Drambarean: How do you feel about the winner?

Kevin Bell: I was born and raised here. So I think a part of me is used to it, although I certainly went soft being in the Bay Area for a while. So this winter, being as cold and snowy as it has been, it’s been pretty abrupt. We’ll try to transition back.

Joseph Drambarean: Getting back to football, some of my favorite matchups are always Green Bay, and Minnesota or Green Bay and The Bears. And when you have those awful games up in Green Bay or in Minnesota, which is like snowing, windy, minus 10, that’s just the Best. I would never want to play, but I love watching it.

Kevin Bell: Yeah. As a Bears fan, at least we can align on mutual dislike of the Packers.

Joseph Drambarean: Yup. Although, don’t tell my wife that. She will probably divorce me if she hears me say this on the podcast. Well, thank you, Kevin. This has been awesome. Thank you for joining us. This has been the FinTech Corner Podcast. Find out more about Trovata at trovata.io and yeah, stick with us. We’ll be talking about more topics in tech, FinTech, and the evolution of the finance space. Appreciate you, Kevin. Thank you for joining. We’ll see you next time. This has been FinTech Corner. See ya.