CFO Increased a Cyber Company’s Cash Flow by $1,000,000 in 1 Year
A CFO’s job is more than just managing a company’s finances — it requires being creative and assertive, with the goal of improving the bottom line. For one cyber company headquartered in Israel, this was particularly evident as one Brooks Keret CFO took the initiative with a unique idea that earned the company over one million US dollars.
Startups have numerous challenges when starting out, with fundraising being at the top of the list. Finding great investors isn’t easy, and the problems don’t end once the money comes in. This is especially true for non-US companies that often receive the funds in US dollars, and have to pay almost all of their expenses (i.e., rent, salaries, etc.) in their local currency. In these situations, it becomes difficult to maintain the value of the money that was received. Another challenge startups deal with is predicting their cashflow when they just start out. They don’t know how many employees they’ll have down the road, what the salaries will be, or how to map out every expense — which makes taking the funds problematic.
Liron Kfir, a CFO for an Israeli cyber company on behalf of Brooks Keret, faced the same issues. “We started with the forecasts first,” Kfir shares, “and created a Gantt chart of the funds we’ll need for different period of time — 3 months, 6 months, a year, etc.” Kfir states that this, as a first step, helped the company get a better understanding of exactly how much money was needed over each period of time. So, for example, if a startup receives $5M in funding for 5 years, they don’t need all of that money up front and can estimate how much is needed over time.
“Since we didn’t need all of the funds from day one, I looked into security deposits that would keep the funds in USD,” Kfir continues. “We got an interest rate of 3.5%, which was incredible, so we deposited most of the money for one year, allowing it to earn interest while we used what we needed for the company’s operations.”
For a time, this method word well, until a big project came up and the company needed more funds. At this point, if they withdrew funds from the security deposit, they would have to pay high penalties, so Kfir decided to take out a six-month loan instead with a 1.75% prime per year while the funds in the deposit continued to earn 3.5%. To put it in plain numbers — the loan ended up costing 20,000 USD, while the deposit earned over 1,000,000 USD just from the interest. “We didn’t expect this,” Kfir adds, “I just wanted to find a solution to a challenge I and many startups have faced with funding many times, and tried to find a creative way to do it. I’m surprised at the results, and thrilled, of course.”
When asked if this method would still work in today’s post-COVID world, Kfir responded, “the pandemic is affecting everything, including interest rates which are currently lower. However, banks are often evaluated by their deposits, and when they don’t have enough, they offer higher interests to encourage companies and people to place their funds in high-yielding deposits for long periods of time. This same exact method may not be applicable for every company, but I think it’s important for companies and CFOs to talk more about the challenges behind the scenes and share creative ideas that worked and didn’t work so that we can help each other grow in this ecosystem.”
