This episode features an interview with Ross Tennenbaum, CFO of Avalara, the leading provider of automated tax compliance software with a market cap of nearly $15B. Over his more than 20-year career, Ross has served in operational and financial leadership roles for companies like Credit Suisse and Goldman Sachs. He’s an entrepreneur and investment banker turned software executive, with an MBA from The Wharton School. On this episode, Ross discusses how to harness skills from previous finance roles to become a strategic partner as CFO, when to bring on a treasurer, and leveraging modern technology to drive growth.
This episode features an interview with Ross Tennenbaum, CFO of Avalara, the leading provider of automated tax compliance software with a market cap of nearly $15B.
Over his more than 20-year career, Ross has served in operational and financial leadership roles for companies like Credit Suisse and Goldman Sachs. He’s an entrepreneur and investment banker turned software executive, with an MBA from The Wharton School.
On this episode, Ross discusses how to harness skills from previous finance roles to become a strategic partner as CFO, when to bring on a treasurer, and leveraging modern technology to drive growth.
Quotes
“There are many different types of paths to be CFO. There are many different people with different experiences. But really understanding how to run and operate a business and how it works is a key differentiator to being a great CFO, beyond the accounting nuts and bolts. The question is how do I help my team make this company the best it can be?”
Time Stamps
*[0:36] Intro
*[1:47] Interview begins
*[8:56] The importance of understanding all aspects of the business as CFO
*[12:27] Cash Crossroads: How the pandemic shaped the world of finance
*[23:56] The Playbook: Finance strategy
*[24:41] When is it time to get a treasurer?
*[42:42] Report from the Future: The future of the CFO
*[47:23] Quick Hits
Sponsor
The Invisible Vault is powered by the team at Kyriba, the global leader in cloud treasury and finance solutions, empowering CFOs and their teams to transform how they activate liquidity as a dynamic, real-time vehicle for growth and value creation. To learn more visit www.kyriba.com
Ross Tennenbaum: “There's many different types of paths to be CFO. There's many different people with different experiences, but really understanding how to run and operate a business and understand that, that how it works is really, really key differentiator to being a great CFO beyond the accounting and the nuts and bolts that you have to do is how do I help my team make this company the best it can be? How do I be involved in the strategic decision-making, the capital allocation? And you have to really understand it, and to be able to help make those decisions and calls.”
Narrator: Hello and welcome to The Invisible Vault.
This episode features an interview with Ross Tennenbaum, CFO of Avalara, the leading provider of automated tax compliance software with a market cap of nearly $15B.
Over his more than 20-year career, Ross has served in operational and financial leadership roles for companies like Credit Suisse and Goldman Sachs. He’s an entrepreneur and investment banker turned software executive, with an MBA from The Wharton School.
On this episode, Ross discusses how to harness skills from previous finance roles to become a strategic partner as CFO, when to bring on a treasurer, and leveraging modern technology to drive growth.
But before we get into it, here’s a brief word from our sponsor…
So please enjoy this interview between Ross Tennenbaum, CFO of Avalara, and your host, Bob Stark.
Bob Stark: Welcome to The Invisible Vault podcast. We actually have a great guest today. I'm really excited about this conversation. Ross Tennenbaum, CFO of Avalara. Ross, welcome. And how's your day?
Ross Tennenbaum: Hi, Bob. Thanks for, thanks for having me. This is super exciting. Uh, day's going well. Uh, I'm excited to dive right into the podcast.
Bob Stark: Well, perfect. Well, let us dive right in. I actually would love to know, because I ask every guest this. And so gonna ask you the exact same thing. Why finance? What was it?
Ross Tennenbaum: Why finance? I mean, the truth is because I, because I didn't get into med school. Um, you know, you know, my whole family, uh, are doctors and dentists. My wife's family, my family. And so I really grew up wanting to be a doctor at a young age, and I had it all designed, which I wanted to be a cardiothoracic surgeon and all this. And somewhere along the line in high school, I started, uh, um, I remember working for my dad's medical practice, um, in the summers and I was always handling the money and I was dealing with the insurance companies and I was dealing with the operations. I had no interest in what was going on in the back rooms and the medical side, really interested in the business stuff. And I started pursuing internships and stuff around business. And when you go into business, Bob, as you know, um, what is business? Like it's the broadest kind of thing. Medical it's like, okay, am I going to which type of doctor am I going to be? With business, it's like, what am I going to be? And, um, and I started exploring, you know, all different facets in college. And I remember, uh, Bob, I'm just going to give you the real honesty here. Um, I was in college. I had a professor and they said something along the lines of like, Hey, as you think about careers, If you're focused on money, you know, I'm going to tell you the secret to how to make a lot of money. And back when you're a college kid, you know, in your planning career, it's about, I want to make a lot of money. You know, today with a family and all that there's other priorities, for sure. But then I'll be honest. It was about making a lot of money. And what he went on to say was, there's two ways to do it. One is have equity in a company where you and your team can build it and create a lot of value, and you get a percentage of that value, or, um, you know, work in a business where you're kind of clipping a coupon. He said, clipping a coupon on transactions, the larger transactions the better. So Bob, here's the thing. I was a banker, clipping coupons off the transactions. And, uh, you know, in my first job, I was a, an early founder of a company where I had equity, it didn't work out. And at Avalara, you know, obviously I have equity in the company and our mission is to create value for our employees and our shareholders and our partners and our customers too. And, and, and, and share in that value. So, so it really, you know, really got me thinking about, you know, how to build a career. And I was always really fascinated with the business side and the operations, and I always wanted to build a company and create a lot of value. Uh, and, and so that's sort of how I got into going into a company and getting into the financial operations of a company,
Bob Stark: That's quite the inspiring words from your professor. I think that's very well stated, uh, to a hungry 20-year-old.
Ross Tennenbaum: Bob, I think you're supposed to talk about passion and like, what will you love and all that stuff. And I think there were some of those, but, but, this, this guy was pretty, pretty direct to the point. He, he knew what most college students were thinking about.
Bob Stark: Yeah. Uh, it's a great, it's actually really good advice. And especially for what you were looking at at the time, and I imagine it set you on the right path, as you said. You started following that advice in your career. So, I mean, take us through some of those steps, because I think as you said, you invest in banking is one of those walk us through what got you to become a CFO.
Ross Tennenbaum: Yeah. Um, uh, you know, I started out at college. Um, it was a startup. It was actually, um, back then before, before Zoom and all these products that we're using today, it was WebEx and PlaceWare, and the original video conference. And I, and I started, I was one of the starters of a company. We had five people in a garage, literally, um, trying to, trying to solve that problem before anybody wanted to use any of these products. It really took until the last five years in the pandemic where this became mainstream and there were many generations and iterations of it getting there. And I was the accountant. I was, I was, it was a PR team of one at the start. It became a team of five to 10 and build it out. And then I did a bunch of other things. I didn't stop at finance. I went into sales, I went into sales ops. I went to BD, I went to other general management. It really rounded out my, my career and then went back to business school and really wanted to get back to clipping coupons. I was really interested in, in M and A, and strategic finance and corporate finance and landed myself in banking for a little bit over 10 years at Credit Suisse and Goldman Sachs. And, uh, and so there, you know, it's about advising boards and CEOs on strategic transactions, capital raising. Uh, uh, you know, equity, debt and everything. A lot of strategy. One thing I didn't expect about banking, Bob, is there was a lot of, you know, here's the landscape. Here's doing, here's who's doing what to whom, here's how things can play out. Here's how you should be thinking strategically. And it always was interesting to me that you would go in and tell a CEO and a board all about their company and their space. And I was like, shouldn't, they know more than I do? But what you learn is that you have blinders You're deep in your business. You're deep in the operations of your business. And you need people that can give you an outside-in lens to pick your head up and help you get the strategic priorities straight. And so I thought it was like a really awesome job, banking, and it exposed me to many people and companies, and I saw many, many different things across many different size company, all in software, all in high-growth tech software, you know, was my coverage universe. And then in 2018, I had some opportunities to try different things. Avalara was my client. Uh, I was, uh, I had actually taken the company public. I had worked with them for now it's been seven or eight years, uh, as my client, when I was in banking at Goldman Sachs and, um, and my CEO, you know, said, said, uh, I actually, I remember. I called my CEO and I said, Hey, I need some referrals for a couple of jobs I'm looking at. And it was just after we went public and it was great success. And our CEO said, Ross, that's awesome. I'm going to be the best referral you've ever had, but I want you to come to Avalara. And he laid out the picture. And, and, and it was really cool. And this is something I think that's important for those considering being CFOs or those who are CFOs is he said, our CFO is not ready to retire. It's going to be, you know, a year or two or whatever. When he retires, I want you to come in and operate, uh, it was basically, uh, what we call strategic initiatives group, which is a handful of businesses we previously acquired, you know, that makes up a good deal of our revenue. And he said, I want you to run those as the general manager and get deep business operations experience and really understand the company and how it runs. And I want you to be a partner with finance and understand from the other side and a partner with the rest of the exec team. Because I want my next CFO to be really deep in the understanding of the machinations of our business. And so we did all that. And then when my CFOs were retired, we transitioned, I became CFO. I still run those businesses. And I think that what the lesson is, is there's many different types of paths to be CFO. There's many different people with different experiences, but really understanding how to run and operate a business and understand that, that how it works is really, really key differentiator to being a great CFO beyond the accounting and the nuts and bolts that you have to do is how do I help my team make this company the best it can be? How do I be involved in the strategic decision-making, the capital allocation? And you have to really understand it, and to be able to help make those decisions and calls. So, so that, that was the path. I wanted to get back into a company. I wanted to be part of the operations team. I had a finance bent, and this is kind of the middle ground of finance plus operations.
Bob Stark: Yeah, the way you frame that, it's really interesting. I think it's a combination of just your vision as well as I dare say your CEO's leadership in terms of recognizing that opportunity. Strategy is so key to this role, but there's so many CFOs that really haven't had the benefit of that kind of pathway and that kind of mentorship along the way.
Ross Tennenbaum: That's right. That's right. And I think, um, I think the strategy, when a lot of people talk about, "I'm a strategic CFO," or, "an operational CFO," means something different to everybody. When people say that, I kind of like, well, what do you mean by that? And what I'm learning, I'm learning this every day, is there, there, there people come up the path of, you know, I was a, uh, an auditor. I became a controller. I became a CAO. They come up the accounting path, some come up the FP&A path. A lot more, especially in high-growth technology and software, CFOs are coming out of the banking path, um, or other, other paths that are less traditional. Um, and what that path taught me is how to be strategic, how to tell and articulate, a story. How to think about M&A, how to think about capital allocation, all those things that when I see classic CAOs, they have to go learn this side of it. The banker has to go learn the accounting. Not that the banker has to do the accounting, but they have to be able to manage it and, and build a great team that can, at the end of the day, your number one job is timely and accurate financial reporting, right? So you've got to get that right. And it is your duty. You can't just say I'm the strategic CFO, don't know how to do the accounting. So I'm having to learn the accounting stuff, but come in, you know, with, with, with the capabilities on the strategic side and came in and learned the operations side. So I would just say, if you're thinking about CFO, if you're coming from the CAO side, getting the strategy, getting the operations.
Ross Tennenbaum: So, Bob, what I've learned is those that come up sort of the accounting channel, they need to learn how to be strategic operators. They need to learn how to be the right-hand person to the CEO, how to think strategically, how they can plug into the broader operations to help allocate capital, make decisions to drive the business from an operational standpoint. They need to work on the IR and how to, you know, one of the most important things is how do you communicate and articulate the message, the positioning, the strategy inside to your employees, but also outside to the investor community. And that's, that's the, that's the track that CEOs have to take. And many have done an awesome and been world class. You know, the probably most of them have made that journey. For me, it's the other way. It's all those things that I just explained, I come in, you know, having a good background and capabilities around it. And for me, it's about learning how to, we have a CAO, very, very strong CEO, very strong accounting team. So I've been building out FP&A, which was, I think, understaffed when I got here. Building that out, uh, supplement supporting and expanding the CAO team to, to, to, you know, we're a high-growth company growing globally. So we have to expand that. And understanding at the depth where you can, uh, make sure things are operating correctly and functioning correctly, and that we're fielding the best team and growing it in a way that can support and keep up with, with, with the business. So there's no one way to get to be CFO. Um, but these are a lot of the traits. If you're going to read that and that I'm working on every day, a lot of the traits that you need comprehensively, you know, to be able to do the job.
Bob Stark: Yeah, no, you're, you're spot on in terms of understanding or I, sorry, it's the understanding you're spot on about articulating that balance between strategy and we'll call it some of the, I don't want to call it tactical cause that undersells the value of your CAO, but it is that balance between, uh, and certainly in the FinTech side and the voice of the organization on earnings calls and things like that, having that strategic voice is so appreciated.
Ross Tennenbaum: Yeah.
Bob Stark: So let's, let's talk a little bit about pandemic. So this is a section of the podcast that we call cash crossroads.
So we'll dive into a few things around cash and liquidity, but I actually just want to start with, from a COVID standpoint, things had to change. Um, obviously there was processes, there was work from home, a lot of different things. So not to answer the question for you, but what was different for you from a pandemic standpoint? What did, what was challenging and what did you find of what you changed that you still do? Or you will do post-pandemic?
Ross Tennenbaum: Yeah, yeah. I mean, what changed? The, oh gosh, everything. Yeah. Um, you know, the, the fortunate as, as a high-growth software company tech company, I always say we and our peers are very lucky because we're structured in the way that we in the business that we're in as tech companies, that we can work from home, you know, it ended up being that like really, nobody needed to go to the office. If you juxtapose that to manufacturing or many other sectors of the economy, obviously they're tethered to physical, uh, office-based work. So, you know, one, I had a lot of my peers out there from other sectors, I had it easier than in many respects. I would say fortunately for us, you know, we have a lot of cash. We had and have a lot of cash. We had a lot of access to the capital markets. Business did well through the pandemic. Um, you know, uh, our, our valuation as a public company did well. It gave us more flexibility. So, but even still, bob, even still with that, everything changed. So in a month, I remember, you know, February, March, when it became apparent, it was like two months of our business really kind of paused, because everyone else was trying to figure out like what's going to happen to their business. And they all put pencils down on buying. I think that, you know, it was the freeze of COVID and we're like, oh my God. I remember I was like, literally in the basement, uh, you know, in, in the office, just, um, modeling out scenarios. I went back to banker mode, Bob, and I was literally had the Excel out and I'm modeling all of these different scenarios, all downside scenarios. And my CEO calls me and says, Ross, I lived through the great recession. I've been through other ones. This is going to be the best thing for our business because in tough times, you know, you still have to file your taxes and you still have to collect and file. People are gonna have to change their business models. The thing like e-commerce when they do that, tax becomes harder because you're in more jurisdiction. So he was like all up. And my, my CEO. He's the greatest guy. He's one of those guys you just, you just want to follow. And I was like, okay, he's crazy. I went back to modeling the downside scenarios. And he turned out to be right and I'm wrong, but the point is, you know, very quickly, we had to figure out how to get people to work from home. And even though we're a tech company and that was easier than most, there were still a number of jobs where people have to get the mail and they have to open up mail. Now, we still have filings that are manual with jurisdictions, where you have to like manually process paper and get it. We still have checks you have to send that jurisdiction. So there still are people tethered to offices. And we had to figure out processes to get them out of the office, which we did. And, and in doing that, we had to figure out how to automate some of these things. Things we've talked about for years, Bob, that we never did because they weren't a priority, became a priority and we've conquered and we're better for that. Um, we also had to, you know, immediately cut travel. We used to be, you know, did hundreds of trade shows a year. It was a big part of our, our, our pipeline, our sales pipeline. It accelerated our move from, you know, sort of more of a trade show-based marketing type, kind of a little more of a legacy marketing bent, to where we were going already, which was, you know, full, modern, digital demand gen under our new CMO. It accelerated that shift in investment, which I think may be one of the greatest blessings for our company as a result of COVID. And that's never going to go away, Bob, you know, we've figured out how to do what we need to do anyway. As the trade shows come back, we will start to do them again, but that's really, really helped us. We had to put in new processes and controls for, for travel. For, for, uh, for office, for, for very spend. We had to immediately we, we froze hiring, right? You know, my scenario is like, okay, if this, the biggest thing was okay, Scott, my CEO had his scenarios. I had my scenarios, we presented different scenario analyses to the board. And we said, depending on the trajectory of these, here's how we can spend. And we had to put prioritization in place for what are the biggest priorities for, you know, incremental hiring going forward. Um, and as we started to see months unfold and how bookings were going and how the business was progressing, um, we started to, uh, and it was starting to do well after the freeze started the thaw, you know, we had to then start to unlock and execute on that plan. So, so there's a whole, whole thing that we had to do. It was literally months of you're just focused on, um, you know, planning around scenarios of what could and could happen around this pandemic. Um, the other thing I would say, the last thing I'll say, Bob, is the Zoom culture. You asked what will remain, um, Zoom culture, you know, will remain. And we're moving. And many of our peers are doing this too, uh, uh, structure of, you know, remote workers, uh, what we call flexible remote and permanent. And everyone's got some version of this. And what we say is like, look, there is benefit to being in office, there's benefit to collaborating in person. We, you know, we, we, there, there's a lot of stuff where office space is good. Although we have done really well without offices. And so going forward, there will be people that are remote that aren't tethered in office, but the majority of the workforce will be what we call flexible remote. You're within a radius of an office. You can get there for events, customer events, partner events, employee events, having to roll up your sleeves and do a white boarding session. Um, but if you need to be home because you've got a plumber coming to the house and you need to let them in, because you've got a leak, I had some bad leaks during COVID. Um, you can do that. And so we're not monitoring how many days you're in out of the office, but we want people to be tethered to offices uh, in a flexible way for when the value of collaboration and onsite, you know, uh, interaction is there. So now we're trying to figure out how to reorganize the offices, you know, you know, so that you have hoteling desk and you have like, you know, sort of the, the, the trader desk where everyone can sit together. How do you make it? People have to appreciate that you may have a meeting in the office, but some people are going to be on Zoom. So you're always going to have the screen on that screen on Zoom. And there's a bunch of retooling and dollars being spent and logistics being spent, spent around that. And the last one I would say is travel. You know, we have largely, uh, and in a high velocity inside sales model. So not a lot of enterprise getting on planes, going to customers. But a lot of our travel were interoffice meetings, you know, where you're coming and you're doing meetings. And, and a lot of that in my opinion is Facetime kind of stuff. And so, you know, we're trying to crack down on the, Hey, we don't need 20 people going to trade shows like, yeah, they may be valuable. They may pay for themselves. But let's be smarter about that. Let's be smarter about inter-office travel. Let's be smarter about how we do meetings. Cause we've proven that we can do it without being together. That doesn't mean we don't want to be together, but let's start to shift the big budgets that used to be in travel to, um, more salespeople and more marketing fire power. And you know, more partner dollars, you know, things that can really grow the business rather than flying people between offices to see each other.
Bob Stark: That was quite the set of learnings that you came up with. I liked the way you answered. Here's the different things that we've learned from pandemic. And here's how we plan to do things differently going forward. That pivot is so important. And it's not as simple as the rooftop strategy. Obviously that's one aspect of it. It's, I mean, I'll just give one example because I've see this often in our organization is we don't have to build the offices as big. We don't have to expand in the way that we thought we had to back in 2019, we can scale the number of people, but we can effectively have more people per office than we had before because of the hoteling and flexible work, et cetera.
Ross Tennenbaum: Yeah. Yeah. And it, and it changes the, uh, planning for how you're going to use office space and also rent future offices. You know, we're growing fast globally, and we've got three year plans for how we're going to deal with office space and all of that. I can't say we have it all figured out yet, Bob. All of that is being reviewed and retooled and remodeled for, well, what is the capacity for the office? And like, what are the assumptions for, if you have most of your workers being flexible remote, how many are coming in a day? Do you have to manage the overlap? You know, we were thinking about like this, these teams are Monday and Wednesday, these teams are Tuesday and Thursday. So not everyone's in, I don't know that we're going to end up doing that. It's hard to micromanage those things. But, but now it's like, what is the capacity of our office in a new format? What will the demand be from the flexible remote workforce? And then where do we want to place our bets and our growth? Because as you know, you've got to get office space, you know, years in advance and build it out of when you actually need it. So we're right now in that process of looking at where do we want to go more? And where are we finding ourselves with extra capacity because of the new format?
Bob Stark: I think as a CFO, I find it interesting and actually great. So interesting and great, I should say, that you're thinking of these decisions in terms of the logistics, in terms of how the business is run, going back to your experience and your interest alongside the spending. I think most people probably heard in your answer that, okay, we can divert resources. We can actually allocate cash to this instead of that. And we can make more efficient decisions, leverage your balance sheet better, but also I think your contribution if I'm hearing you, right, is because you understand the business. You understand every aspect of it. So it's not just reacting to, okay. I guess we don't need to spend that. You're part of that. You're a business partner in that discussion.
Ross Tennenbaum: Yeah. Yeah. And I think that goes back to the understanding of the depth of the oper operations and, and, um, it becomes, it all comes down to capital allocation, whether you've got a great framework and model, which nobody does, you know, it's kind of, you're in it day to day and, and, and, you know, understanding how our go-to-market works and how important what marketing is doing and the leap that they're making, you know, and how that will result in, in future growth or not. Um, and how we invest in that, and how we actually take the wind that COVID caused to, to, to actually do a good thing and, and make us force us to be much better at digital demand gen. You know, th those are the kinds of things that are value, you know, even things like, like our, our annual employee, our annual customer event, right? We usually do it in person, hotel. You know, in the past, we'd have like a thousand people, you know, we had, I think it was like 6,000 registrations, um, and you know, 6,000 plus attended virtual. We had our biggest event by multiples in our, in the EU, in our EU customer event, uh, uh, earlier this year. And so it's allowed us to go from, um, just a customer event to a customer, partner and prospecting event. It's allowed us to bring in multiples the number of people, it's allowed us to get better speakers and content and engagement. Um, and so something that was looked at to be, oh, no, should we even do our crush event this year, we did it and it ended up being, Hey, now, Bob, to your question of what's going to remain, we're going to do an in-person and a virtual. Um, and so as CFO, I'm like, well, do we really need to do an in person thing, guys? Like, let's think about how we're allocating dollars. Do we need two events? And what's the, and, and so there's good thought process, but I could easily push on, hey, let's do the virtual. Let's not do both. And what's the value prop of both? So anyway, the details of that, you know, we don't need to go through, but, but that's something that's here to stay. And is a benefit from how we've had to reorg from this pandemic,
Bob Stark: Yeah, it's, it is an important conversation. It's, it's good that you're having it. You're having it in a great, very collaborative way. And obviously the outcomes that you talked about, those are the right things to consider going forward. Let's talk about The Playbook.
So this is a segment of the podcast where we get into strategy. I know one of the most interesting strategies, at least from my perspective, when we talked before was the fact that you're building a treasury and risk management function. So let's indulge me a little bit. What does a treasury team do for you at Avalara?
Ross Tennenbaum: Yeah. Bob. So we're, we're just, um, we're, we're a half a billion dollar revenue business. We, we, we hit a half a billion in 20, uh, in 2020. Um, and we don't have a treasurer, you know, I mean like my FP&A leader has done some treasury stuff on the side, but we, again, flushed with cash and, and you know, about around free cash flow break even area. Um, we haven't had this day to day treasury need, like the, like the cinema owner who is trying to manage through COVID. So we've been fortunate from that perspective. But at the size and scale and growth that we're at, we're really now in that time where we need to have a treasurer and build out a treasury team. And so I've actually just begun working on the search for that, to bring someone in, in the next like six months. And the way I think about it, like, just like, what are the needs, right? Like what, what what's, what's burning on my mind? The first thing, Bob, right or wrong is bank account management. Okay. And, and cause at Avalara, we have two things. We have our corporate accounts globally and you know, again, we're, we're, we're growing globally pretty fast, so we're constantly expanding the footprint. And two, we have a, uh, a payment facilitation where when we remit, we prepare automate the preparation of tax returns for our customers, we pull their funds and we remit it with the return to the jurisdiction. And so that's kind of like a, a payment business, you know, attached to our returns business. Um, and so there's a bunch of bank operations there. And so one is just like, we have all the Sox Compliance, we have a lot of controls around it, but what keeps you up at night, like fraud around bank account management and, um, and, and that kind of, and controls around all that. And so we're constantly looking at that. I just think having a treasurer in that can day to day, you know, take a new, fresh view at all of that, make sure everything's in compliance, make sure everything's well managed, um, you know, will be really, really valuable. And again, that's just what, something that keeps me up at night, right? So, so that's something about. Second is investment management. You know, we have, we have all these funds. There's not a lot of interest out there, so it's not something that I've had to really think about a lot. Um, but there will be a time and there probably already is some better things we could be doing. So get that going. You know, third is capital markets transactions. As a banker, um, um, I'm fine there. But having somebody to help manage the day to day and, and be more strategic and plan around the future of capital market and, and, and, um, um, balance sheet management, uh, will be really valuable. Uh, one of the big things as we've grown internationally, we've acquired some businesses. We have a lot more entities international. We have a lot more jurisdictions where we have to send or receive cash to corporate. Um, and so there's a constant sending, receiving, there's currencies, there's currency conversions. There, there's hedging potential. We've left money on the table and the hedging just cause it just with everything going on, we haven't focused on it. And then there's cashflow forecasting. Like, you know, we've got really good FP&A, P&L forecasting. We've got, you know, a decent view of cashflow forecasting. Again, we haven't had to do the day to day operational cashflow forecasting. But for, you know, managing, um, you know, just, just good hygiene around managing and cashflow, forecasting and guidance and all that stuff, you know, is, is another area that we could, we could beef up. Um, and then we also do a lot of M&A, so, you know, cash management and planning around around M&A is also very valuable. So that's a, that's a pretty decent pool, Bob, of stuff that we are doing in some way, shape or form. And I'm filling a lot of the gaps that a treasurer can focus on just in the pure treasury side of it, let alone like a risk management piece that I'm also thinking about.
Bob Stark: You know what I find interesting is that your, your definition of treasury is actually aligns very closely to what I counsel a lot of organizations on the treasury side, and what they should be doing, is it's the risk portion, the compliance, the governance. Um, you know, you mentioned fraud early in that answer. Those are the right priorities for many organizations, but not necessarily where their emphasis has been or where their resources are allocated. You kind of have this privilege of building a treasury and risk function from the ground up. You can take those best practices of what organizations should have been doing, um, and be able to apply those. And you mentioned currencies as another example of there's money being left on the table, or EPS being slightly eroded by being exposed currencies.
Ross Tennenbaum: Exactly. And there's other things, Bob, for our business. Um, and I don't know, I'm curious how you've seen it, but, but I've talked to other CFOs and I'm, I'm actually, um, you know, sort of actively talking to CFOs about how they've organized treasurers and how companies organize their compliance departments, which sometimes in finance, sometimes in legal, sometimes in ops, you know, cause there's broader compliance activities, regulatory compliance, KYC, AML kind of stuff. Um, and, and, and, um, those are all things that we do. It's generally under the legal department today. But, but we also think about like credit risk management, like in our business, we have a business called fiscal representation where internationally, if you're, if you're, if you're, um, I don't know if you're a U.S. Seller, if you're an out of out of the European Union selling into the European Union, everyone's an e-commerce company now selling into European Union. You know, they require fiscal representation where there's an independent third party, um, that is local, that is basically jointly severally liable for the tax if the merchant doesn't pay for. So it's how they minimize fraud. And so we're in that business. And then, you know, you, it's a really good business, but you just got to manage the credit pools. Like, you know, what's our exposure? How do we leverage insurance, um, uh, to protect us? How do we minimize risk? You know, the good thing is there's not a ton of risk, because if they don't pay in like a month, we can shut them off, you know? Um, and so you don't have a ton of exposure, but as we move forward, there's a lot things we're doing around financial products as a FinTech company, around treasury products, around credit risk management, around insurance, around KYC, AML. All that stuff has to go somewhere. As I've talked to others, you know, and I say, I called treasury and risk management. Not a lot of others have it, have it structured in the way on talking about it. I don't know if you've seen it that way, Bob. Um, and so I'm maybe doing something new or something that's a little evolved, but I'd like to build out a small department that can, that can handle handle some of those things as well.
Bob Stark: Yeah, well, there's a lot of, a lot of traditional structures. I'll use that word in quotes, probably, that don't touch on what I'm going to call the true risk management part of what you were saying. Because there is that, obviously the internal compliance, internal risk, governance, you know, credit risk as an example that you mentioned, all of those are sometimes yes, sometimes no involved in treasury. What I find is a gap, uh, which plays on some of the things you mentioned, are, who is in charge or who is responsible for tracking external compliance and government regulation? And you mentioned EU. There's a lot of things happening there. Um, obviously things like minimum tax, um, obviously things like that may facilitate more dividends or caps on dividends and hence repatriation of cash back to the states where maybe it was parked there previously. There's a lot of strategy that is this intersection between, well just a core finance and accounting, which sometimes has some of those responsibilities, FP&A and treasury. And I think the way you're defining and thinking about it puts you in a great position, in my opinion, to cover those off well with the right people looking at the right things.
Ross Tennenbaum: Yeah. Well, we'll see, we'll have to maybe have a follow-up on, on how it's going in six months or a year or something like that. But, but we're trying to build that out. And, and to your point, especially internationally, uh, the rules and the regs are changing fast. You know, we see it in our business and in the, you know, international, we do VAT, we do GST. We do all the tax and complaince activities globally. And there's movement towards real-time compliance, where it's e-invoicing. There's a bunch of changing in, in, in the standards for how VAT's working. Brexit creates a all new complexity. And so that might not be a treasury risk management for those CFOs listening, but it's, it's, uh, it's a case of there is a lot of change happening internationally, especially in the EU, around tax, around compliance around regulatory, uh, that you've got to have cover whether it's in your legal department, finance, but we find it's a partnership. Finance, legal, HR, there's major partnership going on there to, to, to, to, to manage it.
Bob Stark: It's a big theme that I hear in many of your answers, and I like it. Is, partnership and collaboration. And so often there's silos and obviously Avalara is not that way based on everything I'm hearing,
Ross Tennenbaum: Yeah.
Bob Stark: But it is a partnership because you need to understand the business, going back to your, you know, coming into Avalara in the first place. And you need to be able to understand, have the right people looking at external factors, whatever they may be, whether they're more market-driven, economic driven, political driven, or regulatory.
Ross Tennenbaum: Yeah.
Bob Stark: Now there's a, a lot of interesting things that you're doing. I'm kind of envious that you get to build that from the ground up. And I think many treasurers that might be listening to the podcast, they'll think, oh, I wish I had someone like Ross able to rearchitect that way.
Ross Tennenbaum: We're looking for a treasurer. So if you know how to build that out, let me know.
Bob Stark: Uh, I I'm sure there's lots of referrals that'll come just from this interview. One thing I want to touch on before we talk about the future is data-driven. I know this is a topic that's probably very interesting to you. What does data-driven mean to you? Because I know it has so many definitions for so many different people.
Ross Tennenbaum: Yeah. I mean, um, you know, you know, the, I I'll give you, I'll give you a story that, that, that I have. When I was in banking. I, right before I left banking, I was working on Slack's IPO. Okay. So slack, they went public through a direct listing. They then got acquired by Salesforce. But, um, that one stood out for me because like, you know, finance organizations, they have FP&A it's more around budget and financial planning. And then there's other analytics people in, in the companies that and they're all strewn about in different, organized in different ways. But what was amazing about Slack was, um, they had a really strong, they call it their biz ops team and, um, they had a really strong team that like, there was data on everything, everything we were, we, as you go through the IPO, you're, you're just like pulling apart the business. You're trying to write the story. You're trying to understand the model, trying to articulate it. And like everyone we talked to, like CEOs, CFO on down, um, had, um, like a biz ops person, like right next to them. And like any question you asked, you would see this biz op person like w you know, crunching something and then be like, there's an answer. Okay. And I'm, I'm, I'm exaggerating a tiny bit, but the point is like, the executives were like, well-endowed with these biz ops people that really had the business model. I'm not talking about revenue, I'm talking about all of the levers and dials operationally that you can pull, um, that drive the business. And so here, if we can push this one up a little bit, it means this all the way down the chain, right. And it was incredible. It was absolutely incredible because I had never seen anything that robust, at a company that size. And, um, and that's what I think about data-driven. And when I come to, you know, look at other companies, I've seen a lot of different companies, a lot of these high-growth tech companies, you know, the entrepreneur led, see CEOs are often entrepreneurs, they're the founders. And they're like the proxy for everything. Like they know the customers, they know the market, they know what you should do. And like, if you look at our CEO, he built this from his kitchen table to what it is today. So it's hard to argue with that. But while he likes data, you know, he, he has a view of how things should be he's at looking three years advance. He's very visionary. And when he says he's like, I'm always like, looking like, let's go find the data. Is that right? Is that wrong? You know? And, and however, it works out. It's worked out really well for him and for us. But to me, if you ask me, there's like an optimal answer for everything. Like, okay, you want to do that, CEO? Like you have the vision for that? Fine. We can go do these three analyses and we can maybe not get the answer, but we can get a well-informed data-driven answer, you know, for what lever we should pull.
Ross Tennenbaum: So Bob, you know, like we, we, I always look at it, like, there is a way to optimize everything. You know, there's analyses you can do that if you can't get to the right optimal answer, you can get a well informed informed data-driven decision that can help you get to the right answer. So I live in a world where there is a right answer or there's an optimal answer, or at least there's a set of two or three choices. Whereas, you know, classic entrepreneurs, they're not bound by that. And so there's no right or wrong. The value is like, like our CEO and me, we approach it very opposite as you can hear. And so his vision and his unbounded ability to dream and to see around corners and to do things that I can't do because my mind doesn't bend that way, and I'm stuck in the reality of it, coming together with data, with, hey, I see what Scott's trying to do. I see where he's dreaming. I see where he wants to go. He's always been right. I'm sure he's right. But let's start to work it out with some analysis so that we can maybe hone this, maybe optimize this, maybe provide some, a viewpoint that he's not seeing. And I think that if you can do that, um, that's a valuable recipe. And I'm talking about right now, CEO, CFO, or any relationship where you've got a visionary entrepreneur, you know, meeting, you know, a data-driven, you know, analytical rigor approach. And the rest of the business operationally like you just this day and age, high-growth tech, like lead to cash. You've got to know we're spending dollars on these 72 campaigns targeted at these personas, you know, with these products and how much time are we working them? And which ones actually close? And what's the actual reality of what we sold and what the bookings were? And attributing that back and constantly dialing it in whether it's automatically dialing or people dialing. And, and that's, and, and to me, and, and you know, that sort of high-growth, modern technology, it doesn't, you don't have to be a tech company. Any company leveraging modern technology, like that's th that to me, that's data-driven. It may be automated and built in, but you've got to know how to tune those dials. And you've got to have the systems and processes built underneath the covers that can take in all of these signals, make sense of it, and help you optimize the machine. I mean, that's literally the differentiator between the winners and the losers today, and increasingly going forward as everybody becomes an e-commerce company and all those cookie crumbs are out there to optimize and to capitalize off. I mean, it's literally the win or lose things. So data-driven, don't think at CFOs, don't think about it as your FP&A, or, you know, producing financials and planning and all that's critically important. But you know, you gotta think about, you know, what are all the levers across the value chain that need to, that can be optimized to, to really drive the business and out-compete the competition.
Bob Stark: Yeah. It needs to be part of everything that you do.
Ross Tennenbaum: Yeah.
Bob Stark: Uh, it's I find measurement is, especially in, in finance, and I come from a treasury background. Measurement is not part of the DNA of the treasurer, typically. I'm sure your treasurer will, but it's typically not something that's been done and a lot of finance teams don't think of the measurement outside of just the, you know, just raw reporting. Okay, yes, our cash was this, or our debt to equity was this. They don't really think of the business alignment of the outcomes that spend. Like, just the simple analyses, like you mentioned of here's what we spent on, let's just say, this marketing initiative. And did it convert or did it not? Did it actually, going to conferences, was that a better use of our dollars, including the travel then spending a little bit extra in terms of digital content? Those are the sorts of things that I imagine you have that sort of data, because you've built that rigor, um, throughout the business operation.
Ross Tennenbaum: Yeah, yeah. I mean, we're, we're we're building and that goes back to what we said earlier, which is, you know, we brought on a new CMO and maybe a year and a half plus ago, I, you lose track of time and COVID, and you know, he was the right person to help us drive the journey to everything we're talking about. Modern demand gen, everything's measured. Like, I, I love, this guy's name's Jay Lee. He speaks my language. And this is the important part. Like when I was in the interview process with CMOs, we, we met a lot of great ones. But when I told our COO who hired him why I wanted Jay, I said, he speaks my language. And what does that mean is he's talking CAC. He's talking LTV. Not at the aggregate level, but he's talking about it by, by customer. By, by industry, by segment, by campaign. He's talking about all the dots, and basically your question about data-driven and a lot of people talk about data-driven, and I always ask, what do you mean? Because everyone's got different definition. Like that's what I'm talking, I'm talking about, he's measuring everything. We're not there ever, you know, it's a transformational journey. Uh, and like I said, COVID accelerated it because it got us out of the old trade show minds, predominant mindset to we've got to go win in this. And I think it's critical to winning because that's how you're going to win or lose going forward and everything under there will be instrumented. Um, so, so, so anyway, I I've overemphasized the point, but, but I just think as a CFO, you've gotta be thinking how the functions are instrumenting the business and what are the two levers in each function that are most important to get right or wrong, that ultimately roll up into your revenue number or your EBITDA number and all that, because you're down the line at the end, and you want to get as far up the chain as possible, and really be deep in the weeds with those partners for what are the key levers and how do you help them invest right to get those levers right.
Bob Stark: I like that answer. In fact, the next question I'm going to ask you, uh, I'll share with you why I'm kind of laughing when I say this is because I was going to ask you, fast forward 10 years and what do you think you, as a CFO do differently. And you may say, well, I'm not going to be a CFO in 10 years. I'm going to be this. But, but what's interesting though about this question, is that a lot of people that, that I talk to when I ask them, well, tell me what next looks like. What does the future hold?
Ross Tennenbaum: Well, I mean, you know, my answer is kind of boring because I, for a couple of reasons. One, you know, 10 years a, I expect to be a CFO and I got a lot to do and learn and accomplish. So I'm excited for that. But, um, I don't think a lot changes, um, to be honest, like everything I'm doing today, I think I'll be doing. And so the there's kind of two areas that I think about. One, Bob, is what we just talked about, which is more and more as you become a digital company, as you transact, whether it's online or even in stores, everything's measured. You know, the cash register today, like, you know, it knows what products you sold on a Wednesday, when it was raining, you know, after three o'clock. Like everything can be sliced and diced and measured and optimized. So we're going, w in many ways we've made it more complex. 30 years ago, you couldn't do any of this stuff. So life was more simple. Now we've made it more complex, but in a way that we can actually measure and optimize and disrupt and transform. And so I just think, Bob, it's more of what we just talked about, is more tools and more experts and more disciplines and rigor around it. So you're going to have the people that know how to build these things and do these things. I think right now it's still, these are end-to-end cross-functional projects, right? These are things that, you know, you've got to bind together teams and you have to have the right, you know, operator's doing it. And there's not a lot of people that know how to do this stuff. So I think you have more people, you have more tools. Doing it'll be easier. I think it will be actually critical to survive on success and competition. And so it's more of that, Bob, is like, if you're gonna invest in anything like it, it's nice to say data-driven. It's nice to say I'm investing in data analytics, it's buzzwords. But I do think it's like literally make or break a company as we go through time. Because if you're not doing it, your competitors will and they will beat you. The other area for, at least for, everyone's got quote to cash as a process and set of systems. For me, it's acute in a high-growth tech area. And when I talk to CFOs and my peers in high-growth tech, they've all either gone through quote to cash transformation, or we'll go through it. And I just say it is a really hard thing to do. It's harder than replacing your ERP. And what I'm getting at is not just transformation of quote to cash systems and processes, but there's all this promise of solutions that are no or low-code. Drag and drop building stuff. You know, right now, when we look at transforming our business and our quote to cash from a couple product SMB U.S. company to a multi-product, multi-segment global, you know, that's the journey we've been on. And the systems have to keep up. Like, doing that is a lift, like requires consultants, requires a big cross-functional team, requires engineers, programmers, it's touches everything really, really hard.
Ross Tennenbaum: I hope 10 years from now, stitching together systems, transforming processes is a much more of a high-level, business people get in a room, map the process, can drag and drop, and that'll create integrations and connectivity, all that. And so I think those are the two things, is easier ways to map workflows and program systems and evolve it. So transformation isn't this big three-year thing, and it takes a lot of money and time and effort. And it can be done more by business people that understand the business combined with all that data underneath, because they're all related, right? You know, it's a workflow, there's data traveling through, you got to get the data right so you can report right and understand the business. You got to get the workflow right so you don't make mistakes. Whatever all that is, I'm probably not articulating as well as I could, is what I think will be the most important, the biggest evolution and change to, uh, make our jobs, um, uh, better and easier, you know, 10 years from now.
Bob Stark: I actually think you articulated it perfectly. So I like every bit of that. So, well, incredibly well done. Let me finalize this by asking you just really quick hit questions.
So I'm going to go with four rapid fire ones. You can answer literally as one word or you can -
Ross Tennenbaum: I've never done anything one word, Bob.
Bob Stark: I, I, I feel like this'll be an incredible challenge, but so I'll, I'll give you full flexibility in how you want to respond. So first question, the future of digital currencies, but for treasury and finance.
Ross Tennenbaum: Yeah. Um, look, there's a lot of uncertainty around the future of digital currencies. I personally believe that digital currency, new currencies that are not tied to governments or backed by governments will happen, will sustain, and there will become more standardization around it. And I do believe that at some point in time, like we'll have to have payment in digital currencies, manage a book of digital currencies, just like we do other currencies and have to deal with it. I think the problem, and by the way, we don't, we're not doing much around it today. So it's not something today, like I'm actively planning for. This is just Ross's personal belief that this is not going to go away. And I don't know if it's Bitcoin or with, or what, or many. The problem right now is the speculation problem. Is like, if I got to take it and manage it, and yet tomorrow I could wake up and I've lost 30%, you know, it's basically, it's no different than other currencies. Which ones do you want to hold as you're transacting currencies, but there's a lot more volatility potential in these currencies. And so I don't think it will become a mainstream corporate standard until something happens to dampen, you know, the volatility. And what I think will probably happen to start is the banks, the investment banks, are always good at coming out with products, hedging products, or other types of products where, if I'm kind of forced, or I have an opportunity to take digital currency to advance my business over my competitors who may be laggards, I can buy products that can offset some of that concern. So I think it'll definitely happen. I think it'll be it'll, it'll, it'll start to really happen because of competitive advantage and getting a leg up on your customers. In the tax business that we're in, we think about, okay, people may be paying taxes in digital currencies in the future. How are we going to deal and handle that? So there's definitely early thoughts there. I will be honest, Bob. Um, we don't spend a lot of calories on it yet.
Ross Tennenbaum: It's one of those things that like, that's my opinion, based on, you know, the limited time I've spent understanding it. So it's one of those things where like, I think I could definitely benefit from more understanding of where we're at, where we could be, how we, as a company could benefit or not from it, you know? And so it's like, How does this become mainstream, more mainstream? I'm sure some CFOs and companies are really thinking about it, you know, maybe in, and we, we like to be ahead on these things. So, you know, for me, when these things come up and I'm like, oh, I'm not really sure I have a view, I'm always like, well, I should probably get a view here. So I think, I think it's important.
Bob Stark: Um, next question. Artificial intelligence. Does it replace people or help people?
Ross Tennenbaum: Uh, I, I definitely think it'll do both. It'll replace, it'll replace. Um, you know, certainly, certainly it will help. It's kind of by definition, it'll help, but I think it will also replace, I think, uh, you know, you, first of all, you, I don't think there's really artificial intelligence today. And the stuff that we deal with, um, you know, there's machine learning, there's smart algorithms. Um, I don't think true artificial intelligence exists in the day to day stuff that we're working with. And my only point is whether it does or doesn't, I don't want to get debated on, but it's, there's a lot more to go in terms of intelligence of solutions. I think we're very, very early days. And even in the early days, when I look at like robotic process automation stuff, you know, you've got some pretty powerful capabilities that much more quickly and easily can automate processes than having our product engineering teams go build stuff. Um, and, and, and in doing that, you know, we're already able to, um, you could say it's helping people, but we're definitely not adding more people. Like we're getting leverage from it. So it may not have kicked someone out, but it's allowing us to not, not, not hire people. And I think over time it does become more powerful. Unfortunately, it, it will, it will, it will replace people. And the existential question is, in the past, you know, the purest economics people would say, you know, um, um, productivity enhancements, technology enhancements are able to move people to higher, higher performing jobs. So as this happens, where will people be able to go? And, and what's the outcome there? I don't, I don't know. Um, but it's going to be very valuable to organizations and it's, uh, it's, it's something that I think we're like, pre-gaming right now,
Bob Stark: Yeah, well, especially to someone that has that data-driven vision, like you do it, there's certainly a help and value added that comes. So I like that. Last question. Uh, you mentioned you speak with peers and other CFOs quite often. Are CFOs specifically in your industry, peers or competitors?
Ross Tennenbaum: Wow. That's a great question, Bob. Um, I would say they're competitors. They are competitors that I don't talk to. If I think about our handful of competitor CFOs, I don't talk to them. You know, it's interesting. I remember I have a really close friend. Who's the, uh, chief legal officer of one of the big wine companies. And when he took that job, he said, one of the first things he did was reached out to the chief legal officers of the other wine companies. And it was about, um, you know, sharing what they're seeing regulatory and, and, and how and all that stuff. And he looked at it as, um, you know, a peer and not a competitor. Like we can be competitors but there's also a greater value that can be had here. And it's always stuck with me, Bob. And I think that, you know, maybe the point of your question, I'm curious how many people answered as peer instead of competitor. Like right now it's competitor and I've fought over the, over the time, like, hey, should I be reaching out to this person or that person just to, you know, compare notes about the industry and about how we can be, um, you know, uh, uh, you know, how we're doing certain things? Um, so right now it's purely competitor, uh, curious how many actually answer that one as peer for their industry.
Bob Stark: Well, you answered my question. So I'll answer yours. Um, depending on the business role, uh, it very much dictates. Most in finance, uh, lean towards peer. Um, those that are in any other aspect of operation, which in fairness, because you deal with the operation, know it so well. I suspect that's why you lean towards competitors if I'm being so bold.
Ross Tennenbaum: Probably.
Bob Stark: But anyone that has any aspect of business operation always says competitor.
Ross Tennenbaum: Yeah. Interesting. Okay. Interesting. So it sounds somewhere kind of a hybrid and that could be why.
Bob Stark: I think that's exactly why.
Ross Tennenbaum: Well that you get Bob you're giving me something to explore. So I appreciate that.
Bob Stark: Well, thank you. I appreciate this conversation. It was fun. Uh, we obviously spend a lot of time and we could have spent I'm sure, tremendous more. I feel like there's a part two at some point in our future, but for now I want to say thank you very much. I appreciate your time.
Ross Tennenbaum: Yeah. Thank you, Bob.
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