Episode 10: Leveraging AI and automation to fast track collections

Madhurima Gupta:
Welcome to the Mid-Market CFO Circle podcast powered by RadiusOne. I’m your host, Madhurima Gupta. We hear you mid-market CFOs and we’ve got your back. Every Thursday, we bring you the CFO circle podcast with your peers, and we discuss the challenges that you face at your office and how you can leverage emerging technology to solve it. Today, we have with us Blair Cook. Blair is a many-time corporate director, CFO author, speaker, educator, and professional development innovator. He’s currently working as CFO at Mara Renewables Corporation. He co-founded Executive Finance Partners in 2012, where he works with startup, growth, and turnaround companies as an advisor and an executive. He works with real businesses to experiment the theories and practices developed both in academics and in real-world. He then shares his experience in stories with others, uh, of what works in the CFO office and what doesn’t, and which is why we have him today to talk about how CFOs can build a world-class finance function. Welcome to the show. Blair, how are you doing?
Blair Cook:
I’m doing well. Thank you so much.
Madhurima Gupta:
So thank you so much for taking the time to, you know, contribute back to the community. And on this topic, the very first question that I have for you is to understand the right time for founders of businesses to hire finance leaders.
Blair Cook:
Uh, sure. Yeah. So founders, uh, of businesses typically will reach out to a CFO when they’re ready to start scaling their business. And, and they’re probably going to need capital they’ll need infrastructure, they’ll need reporting. Uh, and that’s probably the first time they’re gonna say, you know, I need a finance person. And so, um, in those early stages, you know, I’ve been a CFO of a startup where there was myself and a founder, um, you know, very, that was very early being brought in. But the impetus for that one was, raising capital and going public very quickly. It was in a blockchain, uh, application. Other times you can go quite away cause there’s a lot of, um, you know, seed capital that might be spent over, you know, a year or two proving out a prototype. And you may not need a CFO or certainly not a full-time CFO. You may just wanna tap into a part-time CFO, um, or a fractional CFO. And that might be sufficient until you get to that point where you need to, build a financial presentation or raise some capital or you start, um, you know, having monthly reports of financial results that need to be shared with stakeholders and users like banks and the like. And then you may want to think about, uh, bringing on a CFO. So you really need to have that, that critical mass, uh, behind your business before you’re gonna reach out and find somebody.
Madhurima Gupta:
So if you focus on those companies that are growing, right. For these companies hiring a CFO early on, um, how can it help, let’s say a to-be-enterprise business? Or even, um, you know, if you talk about the companies that are aiming mergers and acquisitions.
Blair Cook:
Well, there’s a number of different things that CFOs can do that really adds a lot of value. You know, we can do reporting, but to be honest, that’s not the best use of a CFO. You probably hire a controller type to deal with the reporting stuff. And so, um, you know, CFOs are really useful in terms of bringing that value-added skill that helps a business scale. And so scaling requires, uh, a couple of things. It requires building a team. It requires, you know, putting processes and systems in place. And of course, it requires, uh, a skill to help, the development and the execution of strategy. And that strategy could be through either organic growth or, a business pipeline of a product that they’re trying to bring to market. Or some companies will accelerate that by using mergers and acquisitions.
And so that’s a part where a CFO will reach out with perhaps, uh, a director of corporate development or the CEO to identify targets in the sector, evaluate those targets, screen those targets, perform due diligence, negotiate the transaction, value the transaction. Then bring it to a term sheet and purchase a sale agreement and then eventually integrate that acquisition into a business. And so again, CFO would be a key right-hand person for the team to make that happen and bring that, uh, merger and acquisition to a successful conclusion.
Madhurima Gupta:
So, Blair, my other question is around, there are a lot of cases where when businesses start, uh, the responsibilities that you expect the CFO to shoulder are often done via CEO, right? So, do you think that when a company is structured like this, then there are certain areas, that are left out and will be better handled by a finance leader instead?
Blair Cook:
Yeah, certainly it really depends on the background of the CEO. You know, some CEOs are very adept at, uh, raising funds and dealing with banks. And then some CEOs, you know, true founders are very technical, uh, because that’s where they found a business idea. And so for those, um, that are perhaps more hands-on, better at selling, better at technical, better at engineering, you know, it probably behooves those kinds of CEOs to have a good, strong financial person by their side. It just, makes them well-rounded. But like I said, some CEOs are very adept at raising their own money, negotiating their own deals. Uh, and so I’ve worked for both types of entrepreneurs that are out there and they can do both ways. Um, and so for those ones, it’s perhaps not as important to have, uh, a CFO by their side. If they are financially literate or financial experts themselves, and sometimes they just need somebody to run the numbers for them. In which case you don’t need to have as qualified a CFO, a good strong controller can help them with just running numbers and making sure the financial reports are available. So it really depends, I think, on the competencies and the background of the CEO to determine, you know, what and how soon they need to have a, a full-time CFO, uh, by their side.
Madhurima Gupta:
Blair, the other question that I have is, how differently can a CFO create value in an organization in comparison to a financially equipped CEO?
Blair Cook:
Uh, sure. Yeah, listen, there’s a lot of different ways that, um, a CFO can and should be creating value in an organization. You know, first of all, I always see the role of the CFO as kind of a strong number two to the CEO. And so I really think that the CEO is outward-looking, looking for strategy, direction, looking for opportunities, and bringing back that mission, vision, and setting the values of the organization. But the CFO, uh, really can add a lot of value because they take that input and they make it happen. They bring life to the vision, and that’s usually the source of entrepreneurs I like to associate myself with. And you can have, you know, you can have the most, aggressive and assertive CEO out there, and you have the most conservative CFO out there and it makes for a nice complement, a nice mesh, uh, because they complement each other in that way. And so one, you know, sets the vision and the other one executes the vision. And so that’s probably the first way that they can add value to an organization. Um, typically CFOs will add a lot of value in terms of the credibility that they will bring to an organization cause of their financial background, their experience, um, they’ll set up their reporting systems. They’ll hire good people to be able to put credible reports out there. And that’s foundational because that sets up the opportunity to, uh, engage with stakeholders and whether it’s with the board of directors, uh, on a credible basis or with lenders on a credible basis, or even if you’re raising, trying to raise equity financing or with capital markets on a credible basis. And so, you know, typically your CEO would not have that same level of credibility as the CFO would. And so that’s very often the second area that a CFO can bring value. And probably the third area, I’ll only mention three, but the third area that we add tremendous values are around the cost of capital. Managing cost of capital, which is through raising financing. And there’s so many different sources of financing to raise today. And so it’s knowing which sorts of investors to engage at which stages of a company’s life cycle. So early-stage companies will engage often with venture funds. Whereas later stage, um, more mature companies will try to use more debt leverage. And whether they’re doing it through private markets or through commercial banks, you know, that really depends on the nature of the situation and the context that they find themselves in. So a CFO is usually well-positioned to figure out what’s the lowest sources of lowest-cost sources of capital, um, that are available so that, you know, and that can add tremendous value to any organization.
Madhurima Gupta:
Absolutely can’t agree more. So, Blair, you’ve worked across, uh, all kinds of companies, right? Companies that are publicly listed, you’ve worked in investment management companies, um, also companies that were acquired, right. Through this range of experience that you’ve had and as a growth-focused CFO, which of your steps as a CFO, do you think helped your office support the business growth?
Blair Cook:
Uh, yeah, sure. The way I think about, um, supporting the growth of the business, you know, first of all, I referenced it earlier. It really boils down to credibility. And so, you know, the first thing I would say that we, we establish is you have to do kind of the nuts and bolts of finance and accounting. And it’s not to say I don’t do reporting, but I need to hire a really good team because nothing will shoot me, uh, in the foot faster than if I don’t have those processes in place. Good reporting framework in place, you know, setting up adequate or system so that we can report things, uh, in a timely fashion. So that’s, that’s level one. And then level two is really around trying to figure out what is the mandate of finance. And the mandate will depend on what is the business plan. And so if we’re in a high growth industry and we’re trying to scale, uh, quickly, well, then you’re gonna need to a team with competencies that allow you to, uh, allow the business to scale. So again, if it’s an international business, having international tax, for instance, and having access to that, whether you outsource it or insource it, but thinking about those, all the different competencies that the finance function needs to deliver on for that mandate. If you’re a public, a company you’re gonna need to have some financial reporting experts, you’ll need to have internal control experts on your team to deal with all those kinds of regulatory matters. And so that’s probably the next stage. And then the final stage is, you know, I call world-class finance, which is, this gets back to this idea that we have to add value through strategy and strategy development.
We have to add through, uh, value through data, data analytics, so that we’re making smarter decisions. We have more predictability, uh, to our outlooks. And then I come back to the idea that yes, we have to engage with capital markets and being raising, uh, funds or, fundraising aware, even if we’re not raising funding, we’re always aware of what is the investment thesis, the investment story of the company and our ability to raise funds, sometimes even when we don’t need it yet, it could be in the future. So always having that posture, that hat on.
Madhurima Gupta:
So the other thing that I wanted to understand is, um, you know, in every job that we take, there’s some sort of learning that we have, it could be because of mistakes you do, or it could be because of things that you do. Right. So what have your key learnings been, uh, throughout your, you know, enormous experience?
Blair Cook:
Oh, where do we start? Uh, no, I’ve learned a lot of, I’ve learned a lot of things I’ve been doing. I’ve been, uh, 30 years into my career at this point. And so, you know, and I’m always learning. I don’t even pretend to think, I know it all. But, you know, I’ve been CFO seven times, I’ve been on three corporate boards. And so I’ve seen a lot of different businesses over the years. And, uh, probably some of the key learnings, one of the key learnings, that stands out in my mind was, um, you know, I had recently got an MBA. This is, you know, 20 years ago and my first CFO engagement, and I always thought everything was a strategy issue. And this was a turnaround company. And one of the directors came up to me and he said to me, he said, Blair, yeah, this company may very well have a strategy issue, but it’s the execution that’s killing it first. And so in my mind, and that’s fundamentally changed how I approach the companies I get involved with and a number of them happen to be turnarounds. And so sometimes you need to do those, those basic processes that I alluded to earlier. And if you aren’t doing that, don’t even bother talking about strategy because you don’t have the credibility, you don’t have the foundation built. And so that’s why that focus on execution before strategy. If you don’t do that, you’re a turnaround. And it’s interesting how many companies I’ve come to that are, that have been around a while. And they all think they’re growth companies, but yet they’re not executing their own strategy very well. And so until they’ve found what market niche, what value proposition that they bring to the market that makes them unique in the first place. There’s no point in talking about mergers and acquisitions, and organic growth strategies when they aren’t even doing their existing business. Right. And so for, in a couple of these instances, uh, these turnaround situations, we shrunk the business, we shrunk it down to the profitable core and then started talking about strategy and how to grow it. Because over the years, both of these businesses had, uh, just gone after top-line growth without meaningful increases in the bottom line. And so those were key learning execution before strategy. Probably the second, I’ll only share two with you, but the second one is the importance of people. And there’s been all kinds. You know, I haven’t gotten far in my career, the organizations I’ve worked with, haven’t gotten as far, and haven’t been as successful without the people. And, you know, that seems like an easy statement to make, but so much, uh, that can be done on, uh, people management and leadership that you think people take for granted. But it’s very rare in the real world to see, uh, good people management and good leadership, good leadership skills. And so, you know, one of the mistakes I’ve made, you know, very often you’ll try to go out there and hire people who, you know, maybe the cheapest or the people who maybe, you know, you can train and develop people. You know, I’m fond of this expression that sometimes you pay peanuts and you get monkeys. And so it, sometimes I go out there and I try right now, I try to hire the very best people I can find. And sometimes I have to pay more for them, but I find they pay off in spades. And so it, uh, I’m very conscious of talent, not only recruitment but talent retention, talent development. And I think as a CFO, you know, I am a finance guy, but that’s become probably the secret of my success is focusing on people because good people will deal with processes. Good people will deal with systems, good people will deal with strategy issues. But if you don’t have good people, you can’t deal with any of those things. And so, uh, a huge amount of emphasis goes into people management, uh, talent management and leadership. So
Madhurima Gupta:
I’m glad I have a counter-question on that. So, you know, I was researching a little bit about how great resignation boils down at the office of the CFO. And one of the things that I realized while I was researching myself is that it typically depends on the motivations of people to find new jobs, right? So if, you know, at the CFO office, you hire really good people and you make them do mundane tasks and repetitive tasks, they’re not happy, they’re not satisfied. And at that point, they switch. So this is one of the key drivers based on the research that I have done. So is that something that you agree with and do you think automation could be one of the things that we can implement that can help solve this problem? Because automation can take away this mundane work.
Blair Cook:
It could be, it very well could be. Um, but I mean, at the end of the day, depending on the maturity of your organization, for many organizations, somebody has to put those invoices into a system and that can be mundane and all that stuff. And so until you get to an RPA solution, uh, robotic processing automation solution or something like that, somebody’s gotta put those invoices in. And so some of the ideas like, with my teams, what I do is I set a roadmap and once a quarter, we have a strategy planning. And then we have once a year, we have an annual strategy planning for the finance department. And on that roadmap, we have a three-stage maturity model that we’ve developed. Level one is very much a compliance level, which is just, you know, trying to get financial statements and processing transactions, just getting stuff out the door and, you know, through my own experience and through being a thought leader in the space is over half of organizations out there live in this level one and level one is not a fun place to be, cause you’re always just trying to keep up with the waves of invoices coming at. You’re just getting the statutory reporting, done, filing the tax returns, filing the remittances. You know, it’s, it’s very administrative feeling. It’s not adding a lot of value to an organization, but there’s so many things that are coming at the finance function today from the regulations to the legislations, to the tax rules, to the this, to that. There’s everything coming at us that we just overwhelmed. And so level two is trying to get a control of that. And, and level two is, uh, you know, I use the analogy of a train with my own team, as I talk about, you know, there’s, uh, you know, the caboose is level one. You’re, you’re lagging the organization. You’re just trailing. You’re trying to keep up. Level two is when you get to become a passenger on that train. And a passenger means that we do have good processes. We do have adequate systems. We do have people who are competent, uh, motivated and we’re in the loop on everything that’s going on. So we’re dealing with issues as they come up in real-time, as opposed to leaving them till year-end or a quarter-end to deal with them. So that’s level two and then world-class finances, level one. And that’s where you’re, you know, you’re leading the train that strong number two, right beside the CEO. And a good CFO will have a team behind them that enables that to happen. And so those are kind of the three levels of making that happen. So the great resignation in my mind is like, you have to tantalize people with the art to the possible, you know, I can’t do robotic process automation overnight. That’s a big undertaking, you know, it may take a year to transform. And so this roadmap, I call it the finance transformation roadmap. It can take, you know, years to make this happen. You know, at Mara, my current one, I’ve been there four years now. And we went from when the day I started four years ago, we were a flat level one. And we have a maturity assessment. There are 23 indicators. And you just say, we were there one, two, or three. We were ones all the way down because we were an R&D company that was largely tracking, uh, costs. It didn’t need much more than that, but as the company went through that R&D stages now commercializing, and now it’s going, it’s trying to go globally. The expectation, the mandate has very much changed. And so I’ve had to figure out how do I transform that finance function from just a back-office into something, you know, that’s more value-added, value-driven, um, in its delivery. And so we’ve got this roadmap of all these different things. And generally speaking to people who have been there each year, we see incremental improvements and that, you know, that gives people something to look forward to. It gives us something to always be working on. It gives people, a career track, and whether you’re getting a promotion or not, as a company grows, you grow in your role, and you learn new things. And so, uh, I think this idea of, uh, mundane tasks, I think that if you are a static organization and you have that mindset, that this is all there is then, you know, I could see why people will get tired of that now. Um, and then, opposing if somebody has this opportunity that the world around us is changing and we have to adapt to that world, you know, I firmly believe that accounting is in the news distribution business, whether we like it or not. You know, we live in a Twitter world and accounting and finance over the last couple of decades has not changed that much. We still report financial results in 45 days or year-end results in 90 days that doesn’t align with the Twitter world. And so are reporting old news, uh, or are reporting real-time news. And then of course the other challenges are we repeat reporting, uh, you know, real news, or are we reporting fake news? And that too is a challenge in finance. And so anybody who sits there and tells me that, you know, there’s nothing that we can do to improve and engage our people to be stronger. I think they’re missing a lot of opportunities out there because no matter what organization you’re in, there’s opportunities to adapt to what we see in the world, uh, around us.
Madhurima Gupta:
So, you know, if you had to give top three tips as parting thoughts to your peers and aspiring CFOs so that they can create a world-class finance function, what would that be?
Blair Cook:
Number one is, uh, it’s about the people. So, uh, this idea that we just finance people, and if you, uh. And a lot of CFOs, you know, we’ve all come up, we’ve all got designations. We’ve come up through the controller office or the finance function, but when you become that CFO, it becomes almost a big chunk of your job becomes leadership and talent management. And so recognize that embrace that, uh, because it is the secret to your success. Um, the second idea that I think, I talked a little bit about was this idea of a roadmap, uh, a maturity model. I don’t care what you call it, but it gives people the opportunity to look forward not. And so we look forward 90 days, we look forward a year and we also look forward indefinitely and to determine what our mandate is and how we’re going to get there. And I don’t overwhelm my team by saying, listen, you’re gonna achieve this in the next 90 days, or the next year. It’s over the years, the transformation gradually happens. And it’s remarkable each year. Our little needle is changing and getting a little more progressive. And we’re getting a little bit closer to what, fulfilling the mandate that we’ve set for ourselves. And so I’d say that’s a, a key thing as well. And, then, probably the final parting tip for the, the CFO is to recognize the opportunity to, uh, increase your value, add in the organization. Uh, I think, um, a lot of people because of our backgrounds, a lot of CFOs are, you know, CPAs or, or accountants or finance people. We, we rely heavily on the numbers, but it’s the softer side of selling numbers that makes us influential, gives us clout, makes us powerful strategic thinkers. And so it’s taking that data. It’s taking those numbers, spinning them into stories. It’s showing the impact of those things. It’s negotiating. It’s the soft skills that actually make you, um, uh, a very powerful individual. And a lot of CFOs as they just get the, get into that corner office, don’t spend as much time, or don’t recognize the importance of cultivating all those soft skills, like relationship building and team building and communication skills and leadership skills. Those are the things I don’t do very much technical anymore. It’s all my soft skills and, and learning to use other people to communicate and deliver the message that makes me effective as a CFO and a leader in an organization.
Madhurima Gupta:
Thank you so much for those words. I think, uh, our listeners are gonna benefit quite a bit from it. Uh, so thanks again for taking the time and having this conversation with me. And I hope to have you back on the CFO Circle again soon.