Stop Burning Cash ASAP

Please note that the transcript is AI-generated and may contain errors. Podcast is not intended as advice and is meant for informational and entertainment purposes only.

Chris Ortega (00:15):

Today, we’ll be talking with Avia Yudalevich, who is the CFO at Intrinsic Brands. As she shares her thoughts on stop burning cash ASAP. And why it’s important for CFOs to not just think about cash burn optimization, but how you’re equipping the business to drive those cash KPIs.

(00:34):

Avia, welcome to CFO Trends.

Avia Yudalevich (00:38):

Good morning, Chris. Thank you so much for having me. Excited to have this chat with you.

Chris Ortega (00:40):

Yeah, yeah. So, Avia to the audience, can you tell a little bit about your background, your experience, what you do, your company. Just share a little bit of scope about your background and your experience.

Avia Yudalevich (00:50):

Sounds good. Today I’m a CFO and head of supply chain for a CPG company. We’re health focused on women’s needs across their entire health journey. It’s a very exciting area. The name of the company is Intrinsic Brands, and we are young startup, two years old, growing, and this topic is very relevant to me and in general, I think, to startups.

Chris Ortega (01:13):

Yeah. For sure. Me, coming from my background, right? I remember working at a lot of different SaaS businesses and we have some small startup scale up kind of companies in our portfolio at Fresh FP&A. And I always sit down with the CEO, founder, business owner, and one thing I always worked through is they’re like, “What you need to be doing this three-year forecast? And we need to be doing all this long-range planning.” And I’m like, “None of that matters if you don’t meet payroll. None of that matters if you don’t have money in the bank in the next 12, 13 months. It doesn’t matter at this point.” So, I think one of my first leading off questions, Avia, speaking from your experience, what for the listeners are some of those top cash metrics that finance and CFO leaders need to be tracking at least on a daily basis?

Avia Yudalevich (01:59):

Awesome. So, first I just want to touch on what you talked about earlier in terms of the cash and burn in general. I think it’s a very important metric. It’s particularly important for startups and other early-stage companies because exactly what you said, if you’re not yet profitable, you have to rely on your cash reserves, you have to fund your operation. So, it’s a very critical indicator to see the health of the company and how much time you actually have and afford the operations before you run out of cash.

(02:27):

I wanted to just touch on another point that really profits our dream, but cash is a reality. And you have to be clever on how you manage that. Chris, back in the days, everyone said cash is king, but really, it’s cashflow-

Chris Ortega (02:40):

Definitely.

Avia Yudalevich (02:41):

Cashflow is king, and it’s very important.

(02:45):

So, let’s talk about KPIs. One little story just to illustrate the importance of this. I had this awesome young talent. He was a fresh accountant right out of college, interviewing very well with me. He did fantastically with his business case, and he passed it, and got a very good package. Then shortly after he started, he asked me, “Hey, how could we afford my salary? I see the cash burn.” And I told him, “Okay, that’s the first trauma you’re going to need to fix.” So, talking about the importance of it.

Chris Ortega (03:16):

Yeah. You talked about cash burn, right? And you talked about how… I think one of the most important elements of it is… And speaking from that accounting mindset, I think, too many businesses and too many finance people, right? When I look at cash, and you talk to an account or you talk to a finance, you talk to a CFO person, right? An account’s going to be like, “Look at your statement of cash flows. That’s one of the major financial statements.” And I’m like, “That tells you nothing.” Changes in accounts receivable like that. I measure cash by looking at the change in the bank account because at the end of the day that matters, right?

Avia Yudalevich (03:48):

Yes. It’s yes and no, Chris, to a degree. There are certain elements. I’m an operator. So, to me, the cash from operations is a very critical element. In the banks, you may have some movements. So, for instance, if you’re doing an M&A, you’re going to have some cash because you may be leveraged. So, right now in the bank, you may have a little bit more of cash. But the cash from operations is very critical. And what does that mean? It means that you have to be super savvy in understanding your business around your EBITDA. You have to ensure that there is a way for you if you leverage again to serve the debt, and you have to understand your working capital.

(04:22):

In my area, I’m coming from almost more than 15 years of experience in the CPG world, so working capital is very important. What does that mean? It means that I often look into, okay, how quick is my inventory turning, what is my investment behind inventory, and can I actually generate quick cash from that. How quickly does it take me to collect cash from customers? You want to ensure that your DSO is not up to the good zoo. And you are working with customers that can pay you, if they have the credit line, and they have the discipline to make payments in time, and you don’t have operational chargebacks and delays behind the scenes.

(04:58):

You have to be fair to your vendors from a DPO pretty few, right? So, I think partnership with your vendors is very important. You have to build that trust, but at the same token, ensure that your DPO is not quit, so you’ve generated those cash flows. So, really, I’m talking about that cash conversion cycle, Chris, which I’m looking at oftentimes. And I think it’s just a good indicator of how quickly I’m able to generate cash for the organization.

Chris Ortega (05:24):

Yeah. I love that. And you gave some great strategies around it too, right? And I think this is something. There’s an arsenal of things, but typically, right? Let’s talk a little bit about the market that we’re in right now, at least from a people perspective as it relates to cash burn, right? Avia, we see in the news where these companies are laying off 20%, 30% of the workforce, and it’s like all of it in people. But you just listed off five things right off the top that you could go and have an immediate impact on your cash burn that you don’t start with people. I never understood that part is like, you say people are your most valuable assets, and I get it. Most of the time in most high-growth businesses, startup businesses are like 80%, 90% of your expenses, 80%, 90% of your cash. But there are also ways that you can go about contract renegotiation. Looking at your DPO, what are some of those other non-traditional things that CFOs should go focus on to improve that don’t start with reducing people?

Avia Yudalevich (06:26):

A great question. I think, for the most part, again, I’m coming from a lens of a startup companies. I think oftentimes, you are going to invest ahead of growth, and hence why you have a cash burn. But people, the notion is that cash burn means cutting cost immediately. Oftentimes, you actually have to optimize some of your cash expenditure. So, for instance, is your CAC to LTV, does that ratio make sense? Are you fueling the business in a way that you’re optimizing your span and you’re being efficient? That way, you’re still going to generate positive EBITDA.

(06:57):

So, remember that it’s not really about immediately cutting costs. There is an element behind cutting costs where to your point Chris, the landscape allows us now to go back and negotiate contracts. Don’t look at fixed costs as a given. You can still go and negotiate. It can be a potential even rent. It can be software. You can challenge the team. Are they utilizing all of the tools that they have in their disposal? Is it really being optimized? And if not, can we ditch some of them? So, there’s a lot of questions on your day-to-day operations where you can improve without immediately impacting any need of [inaudible 00:07:32]-

Chris Ortega (07:31):

Yeah. And I think that operational focus man is a lot of the times when you look at these cost reduction measures, I call them Excel exercises, right? It’s just you’re looking at it, and you’re just doing comp. And I’ve had to do this, right, but I’ve had to make these reductions around people when I’m working with the CEO or working with the founder, working with the board, and I’m like, “I want to make sure we exhaust everything that we could possibly do. I want to make sure we renegotiate every contract agreement. I want to make sure we renegotiate every customer contract. I want to make sure we’re leveraging our banking relationships where is there certain lines, and venture debt, and other things that we can get that can help us bridge a gap as we can come across that growth.”

(08:12):

So, the point to all the listeners is you got to make… It’s not always about instant optimization and these quick excel exercises to do that, right? It’s a strategy behind it. And it’s not just a short term. It’s a short-term, medium long-term strategy. And I think another metric that a lot of businesses at least is cash runway, right? Cash burning, cash runway going the same size. So, talk a little bit more about how you look at cash runway, and how you measure it, and why that’s important.

Avia Yudalevich (08:40):

100%. Everything you mentioned, I want to build on that. I think that the cash runway is a very important element. You don’t want to get to a point where you held hostage, and you don’t have enough months to operate. That’s a very scary proposition. If you leverage, again, you don’t want to get to a point where you fly very low on covenants. So, that’s another super important element. I think that there are different short-term and long-term strategies. Ideally, you wouldn’t want to have a runway of 12 to 18 months. So, you can be strategic in your decision and not operate on a kind of a knee-jerk reaction, which usually brings to a point where people end up letting go some folks, which I think it’s a real detriment to the organization. So, the cash runway is something that I think it’s important as CFOs to understand your business model very well, to project, to look forward, to see where are the key cadence and where you have opportunities, identify those, flag that and make the decision and don’t wait. Be very active to address those.

Chris Ortega (09:44):

Definitely. I love how you said know the business, and this is common… I do a lot of thought leadership and meet with so many different CFOs and VPs and finance professionals from all across the world. And Avia, you’d be so surprised how many of them don’t know their business. You ask him, “Tell me about your business, and tell me about your ideal customer.” And they’re like, “What are you talking about? We do the balance sheet reconciliations in the audit. What are you talking about?” And I think knowing those pieces and taking it a step further, I think one thing that’s always helped me not only in building fresh FP&A and some of our clients, but also in my career is I would sit down with the business and help them understand, “Okay. Yeah, if we make this commission change, if we don’t pay commissions, if we pay it in arrears, are we paid at the end of the quarters?

(10:28):

Here’s how this immediately this decision what you want to advocate for or that maybe I’m advocating with the sales organization, here’s how this bottom line has an impact to our cash burn or cash runway. And I think that’s one of the best things that finance in this connection capacity with the business. I would sit down with them and say, “Hey, here’s why we want to sell an annual upfront all paid contract. Here’s why this is the best contract for us. Not necessarily from a revenue perspective. The revenue’s going to fall how the revenue’s going to fall, but this is why this kind of contract is so important for us from a cash perspective.”

(11:04):

And I remember doing these lunch and learn sessions with our software, with our sales and marketing team and walking them through the ideal contract I want them to sell. I want you to sell an annual upfront best case sale a multi-year. I’ll give you a little discount you can take, but we want to get that cash immediately. And Avia, it was so awesome when we did this and showed them because now they’re like, “I can see it. I can see how my dot connects here and how that helps Chris on the bottom line.”

(11:33):

And typically, when you have that relationship and you build that connection inside the organization, what do we start to see in our sales contracts? We started to see the contracts that we wanted to sell, right? So, I think a lot of it too is not just giving the metrics. It’s getting in the business to help them understand why it’s important for them. Why does operations, why does client success, why does marketing, why does sales, why should they care about those pieces of it and having finance be able to connect that dot of what’s in it for them?

Avia Yudalevich (12:08):

100%. I want to say Chris, in my organization currently, I’m very fortunate because our team is very strong and very [inaudible 00:12:15], but to your point, generally speaking, I would really encourage finance folks to be able to educate and provide context to the employees. Understanding your actions and the implications and the financial ramifications are really critical to a point around…

(12:29):

I just want to double click on the commission side and your [inaudible 00:12:32]. If you identify your customers and your business model, you can see that hey, for instance with international customers, you want to have a prepayment before you even ship the good. That way, you already in a positive cash flows. If you have a commission, you want to make sure you pay those posts, actually getting the sales and getting the cash. So, the commission is post collecting cash. So, here’s just different tactics that you can apply, and you have to ensure that you educate your team to always negotiate for terms, right? Always terms and ideally stretch that. So, if you can cut a deal for a year, but then, your payments are going to be quarterly and therefore you’re going to get the relief on the rate, it’s a win-win for all parties. So, that’s usually my modus operandi. I want to bring a win-win. I want to educate the team. I want to ensure that they understand the benefit and the added value. They help me to drive the wellbeing of their entire organization.

Chris Ortega (13:22):

Yeah. And I think that’s the most important part is I love doing that and enabling and equipping and educating the business because now, they’re taking the same financial acumen that I would take in a decision. And I loved your point around negotiation. And this is what a lot of people don’t or not comfortable doing. A lot of US companies, right? So, I had the opportunity at an international marketing platform company. And this is where I was VP of finance. And I was working directly with another finance leader that was Israelian. And he taught me the art of negotiating everything.

(13:54):

There will be contracts. And we’re sitting here as this $45 million growth software business. And he’s, Chris, you got to negotiate with Salesforce. I’m like, “I don’t know how that’s going to work. I don’t know if Salesforce is… Nope, you got to do it.” And you’d be surprised how many people don’t. They just take that at faith. This from a SaaS spin management perspective. This is where I think a lot of companies have a lot of opportunity to make an impact because you look at the pandemic and anybody was buying software. You were buying teams. You were buying Zoom. There’s probably organizations right now that have this bloated tech stack. And they’re probably paying for licenses that people aren’t using. There’s technologies on people’s credit cards. You know how that stuff goes. And it’s like, this is an opportunity to say, where can we go back and leverage these conversations that really make it beneficial and have the data to support it? And all of that comes through being willing to ask that question and negotiate.

Avia Yudalevich (14:52):

Yes. Essentially. First you have to… As I said, you cannot take it for granted. It’s a huge opportunity right now to reopen contracts, to go back and to understand the other side’s pressure point and come back with a solution that does not allow for churn on the other side but meets your cashflow needs on your end. I think that’s very important. But then, I wanted just to touch on one more point when it comes to… You talked about talking to the teams and ensuring that they understand that. For instance, I love it when we hire a new person that everyone understands the IT needs. So, the occasions that they need, they look into the cost, that treatment.

(15:27):

So, everyone is educated ahead of time. Hey, in my department, do I really need to invest X amount of dollars when I have a new hire or on an ongoing basis? Everyone looks into expenses on a monthly basis. So, we have the analysis, we look into that. We ask the question, we challenge the business case behind it, whether or not there is a good use case for that. So, the optimization needs to be on an iterative kind of mode. So, you revisit the needs and your needs, and the startup is evolved when they change. So, you have to be agile, and you have to be flexible, and you have to allow that. So, you have to allow for the growth and be poised for the growth, but at the same token control expenses, ensure that there is governance and be on the lookout for between.

Chris Ortega (16:06):

Yeah, for sure. And I think what we’re talking about too is when you have the business in that boat, typically, a lot of times I be like, “It’s finance commanding the business, right?” And when we are able to have that more collaborative relationship.

(16:20):

One thing I’ve always loved in finance organizations that I’ve led is we’ve always had a healthy tension with the business. When a healthy tension is like… It was always, “Yeah, we were great.” And once we knew we’d get down the business, you can see the level kind of increase. Not like a negative level, but you can see it increasing. And we would have those healthy conversations. And I think right now, what you’re talking about, which is the ideal stay for finance teams is like you got to have that healthy tension with the business because, at the end of the day, it is our responsibility to make sure we’re looking after the financial assets of the business, right? That is what finance is doing, right?

(16:58):

But if you’re looking after that health and that finance and that cash burn, that cash runway, that DPO, that cash conversion cycle, which a lot of things that we talk about, but you’re looking at it just to command the business, you’re not going to move as fast. And I always have a quote to that, right? If you want to move fast, move alone. If you want to move further, move together. And I think that’s so applicable what finance things to bring to the business.

Avia Yudalevich (17:23):

I love that. In terms of healthy conversation, I think it’s really important that as a finance person, you also allow for transparency dialogue for us. By the fifth business day, we usually try to have already a flash P&L. And the entire company is very gear toward the KPI that’s going to drive cash flows. So, we’re all marching towards the same order, which is really our financial North Star and outside the transparency on how you run the business and what are the implications of the [inaudible 00:17:50]…

(17:50):

If you show the team by the fifth business, this is how we’re looking. This is how the financials look. They can already impact next month immediately. And they make the decision on the spot, so you can really act today. And outside that, I would just also add that. Again, I’m coming from the CPG world. So, you buy inventory, and you take positions, and you take bets. And as long as you know how to pay for those bets, so on the cash burn, you don’t get to a position where you’re bloated, you overbought, and you have a lot of weeks of supply on a certain skew. How do you optimize that? So, that’s another way having the visibility and the discussion and the dialogue and what are the really at a very low level of the information in order to ensure that there’s no any potential future issues.

Chris Ortega (18:32):

Yeah. It’s always that balance. I remember looking back, and I remember telling all the listeners, and I remember I didn’t get that balance right. And I didn’t get that balance because I… And this is where I think data and systems, everything that you talked about, right? You are in a high growth business constantly placing bets. It is like you’re at the Vegas crafts table. You’re constantly putting money out. And I put money out in a software company, and I didn’t get the bet. But one thing I learned from it, basically, the situation was we’re coming into a biweekly payroll. We paid our commissions at the end of the month, so we’re coming into pretty heavy commissions because we’re later in the year. So, people’s plans are building, and I made the mistake. I looked at some information around customer payments, and I missed timed one of them because I got the date wrong. I thought it was going to be in November, but it was actually going to be at the end of December. And it was a pretty sizable cashflow that I looked.

(19:29):

Avia, I remember walking into the… First thing I always looked at is always the bank account. I never looked at the P&L. First metric I looked at coming in the company, it was always on my phone. I would wake up, and it’d be right there as an alert, right? And I seen it red, and I seen it with the parentheses. I was like, “No, this is not good.” And I remember coming into it. I calling our bankers and I was like, “Hey, what are we going to do around this?” And for me, the biggest learning I had for that, for the listeners around it is systems like having that proactive, like you say, it ties exactly directly to your comment on the fifth day. You have to have that speed and that visibility. And as finance professionals, you got to be comfortable to quickly pivot or you got to quickly adapt and say, “Nope, this isn’t working out. We got to change, and we got to adjust pretty fast. Who do I need to?” So, you talked about this earlier that agility aspect is so important.

Avia Yudalevich (20:27):

Very 100% hands down on everything you just mentioned.

Chris Ortega (20:30):

Yeah. Yeah. Cool. Hey, one last question I always ask guests is what is your number one hot finance trend, and why?

Avia Yudalevich (20:38):

In my business specifically, it’s very important that we can scale. We basically grow by virtue of acquisition, so scalability is a very important element. I always tell the team around me, “Hey, whatever you do today, you have to think about 10x and 20x in the future. So, how are you going to plan for that? So, automation and scalability are two areas of something that I really constantly do to search for. AI and machine learning I’m sure can help finance as well. It’s a very hot topic today. Most of us have been already using some of those tools. I’m sure it will continue to evolve and add more value to finance people in the future, either through fraud detection or credit to risk assessment or allocation, of course, investment analysis, et cetera, et cetera. So, that’s an area that I would’ve liked to be able to apply more in the future.

Chris Ortega (21:32):

Yeah, automation and scale, man. I think that is probably one of the cornerstones of every high growth business. All you got to be thinking about. I love your mindset shift. It’s like, how are you thinking about what you’re doing 10, 20, 30x? Really great insights. Thank you sharing for that. If people want to learn more about you, connect with you, learn more about what you’re doing, where can they find you? Where can they connect with you? How can they learn more about you?

Avia Yudalevich (21:53):

Thank you. I’m very open. Feel free to shoot me a notes through LinkedIn. I’m there, and I’m usually available, and I respond very quickly. So, that’s the best approach.

Chris Ortega (22:04):

Awesome. Awesome. Yeah. Definitely connect with you, Avia. I really appreciate this conversation. Thank you so much. I was sitting here taking notes, and I’m like, “Man, so much insights in there, so many different strategies,” and thank you for being part of CFO Trends. And thank you so much for your time.

Avia Yudalevich (22:20):

Thank you, Chris. Pleasure talking to you today.

Chris Ortega (22:23):

Thank you for listening in. Join us for our next episode. Well, I’ll be talking with Emil Vasilev, the VP of finance at Cherry as we talk about life balance in finance. Also, don’t forget to follow our CFO Trends newsletter on LinkedIn for the latest episodes and updates.