Banking » Fintech » GoCardless CFO on liquidity and long-term thinking

GoCardless CFO on liquidity and long-term thinking

Catherine Birkett, CFO at GoCardless - a growing fintech that allows merchants to collect recurring payments using bank debit - discusses leading through the pandemic, opportunities in open banking and why technology hasn't come far enough to accurately forecast and manage cash for an unpredictable future.

How did the pandemic affect GoCardless and your role as CFO? What were some of the key priorities and business decisions that guided you through the last 14 months?

As the pandemic became a reality in March 2020, I remember messaging Hiroki, our CEO, to say that I thought we better reconsider some of our investment plans, as I could see a risk to revenue which GoCardless had historically never faced. Then two weeks later, we were in lockdown and in a world that we couldn’t possibly envisage.

When the change hit we saw a few things happen. Firstly, we had some exposure to industries such as hospitality and health and fitness, so as they were forced to close, the amount of payments we collected for them decreased. And while our merchant base covers a wide range of sectors – which ultimately helped us during the pandemic – we really had to take a step back at this point and ask ourselves how this change was going to affect what we were going to do in the future. I think for me personally, I went back to being more of the CFO I’d been before; very much in cost control mode and protecting the cash-flow of the business.

My experience at Interoute – a telecoms firm since acquired by GTT Communications – helped, where there were times we were faced with the prospect of running out of funding while building the business. I was a relatively inexperienced CFO and so it was a very stressful time. Thankfully we managed to make our cash reserves last sufficiently to raise additional funds when they were needed and eventually move the business into cash generation. And so when the pandemic hit, I was able to rely on these experiences and ensure I didn’t panic. I always held the belief that GoCardless would continue to thrive despite the uncertainty of the current times.

As a management team we discussed our options and I helped to steer those discussions, giving advice on where I thought we should go. We analysed the risk within our merchant base and could see the merchants who would probably see their revenues decline – the rest we thought would probably keep transacting and growing.

We ran scenarios to understand what the downside trajectory could look like, which assumed revenue would decline fairly steeply for six months before recovering. We planned on how we could reduce costs in line with a potential reduction in revenue.

We were quite lucky that we weren’t too far into our last fundraise so we still had a fair amount of cash on the balance sheet, but I also wanted to ensure that we weren’t going to be in a position where we ran out of runway. So I also put a new debt facility in place to help protect the business if the downside scenario became a reality. In the end, we never needed to rely on the debt to support the business but I don’t regret the decision as it meant we could focus on running the business knowing we had strong cash reserves on the balance sheet if and when we needed it.

The next step was to go to the board to recommend the strategy and discuss what we were going to do about reducing costs. I knew we wanted to start investing back in the business as we started to come out of the pandemic, and therefore taking a very significant reduction in headcount wasn’t the right answer if we wanted to continue forward as planned. We agreed as a team to ask a small number of staff to go on furlough and for all staff to take a temporary pay cut.

It was important to us that we weren’t announcing redundancies, and it just gave us a bit of breathing space during the pandemic while we knew revenue was going to dip. We had a pretty intense discussion with the board in order to gain their support and I think my experience of guiding businesses through more challenging times definitely played a part in having our plans approved.

We also took it upon ourselves as a management team to ensure we briefed our employees on our thinking; this included being very straightforward when we were still working through scenarios that we didn’t have all the answers to. I believe this was a really important part of why we had support from our employees when we asked them to take a temporary pay reduction.

In the end, we outperformed every one of our scenarios. Although we did see a dip in revenue, it wasn’t significant and actually year on year we’re still growing nearly 50 percent. We reversed the pay cuts early and started to reinvest in growing headcount at the end of the fourth quarter last year.

I think you need a certain mindset to lead a business through these times, and the pandemic changed my role from being somebody there to support and advise to someone who definitely had a very big influence on the decisions in the business.

What were some of the key challenges and lessons learned from your experience during the pandemic?

Firstly, I think that we learned to use technology better through working from home and being able to adapt. Flexibility in the workplace now has to be a given because we’ve all shown we can do it.

Secondly, I learned a different style of working as an organisation. When the pandemic hit, we were very open with our employees about the challenges we were facing and what we were thinking. We communicated on a less corporate level and took it on ourselves to keep staff informed through a monthly meeting, discussing things like revenue and explaining our challenges during the pandemic in context of our growth trajectory in ‘normal’ periods. This gave employees a good grasp of how the business was performing. Now, you hear people in the company saying that the transparency we had through those decisions was incredibly important and valuable to them as employees.

We also communicated with investors and banks in advance. The moment the pandemic hit, I asked them for more support. Although we had funding available, I wanted to see what they could do in case things became worse than we anticipated, and they were hugely supportive.

I think one of the key lessons learned, particularly for tech businesses, is that things won’t necessarily continue the way we thought they would. As we navigate out of the pandemic, CFOs must think more efficiently about improving business models and cash flow, because at the end of the day, if you don’t have cash then your business fails.

How will technology play a role as GoCardless continues to scale up, both for business and your finance team?

GoCardless has historically provided recurring payments, but as a technology business, we’ve also been incredibly focused on new developments in the industry and how things are going to move forward. Because of that, we started to think about open banking and how that would potentially change the way people access the banking system.

One of the biggest challenges for finance leaders is collecting payments, and quite often these debts go unpaid for a really long time. The way open banking works is that it acts as a different way of accessing the banking system. This allows both us as a business to collect one-off and recurring payments in real time and also frees up time and resources for people and teams in finance.

Technology for us as a finance team is something that’s still hugely challenging. My team uses Excel and Google Sheets, and for many years I tried to find something that would give us the flexibility we needed. Big businesses with a huge turnover and thousands of employees are still doing their forecasting on Excel and the reason is because there doesn’t seem to be a system out there that offers the flexibility to run numbers in different ways and tell you the different outcomes.

For growing businesses in particular, where you’re hiring a lot of people and seeing movement across the organisational structure, you need something that will enable you to continue to change and move things around. The budgeting systems out there are incredibly structured and the scenarios too prescriptive, and that’s just not the way the real world works. It’s unhelpful when you’re trying to predict the future.

When your business isn’t predictable and you’ve got different levers to pull to generate growth in various ways, Excel still seems to be the best tool available at the moment.

What does the journey ahead look like for GoCardless? What are the priorities over the next year?

To be a successful business there are three things you must do: innovate, take risks and always know what you would do if things don’t work out as planned. As a relatively established business in the UK with a strong product and brand reputation, I am confident as a CFO in leading the development of new products, knowing our existing business will continue to do well.  I also believe that it’s crucial to think about the future of your existing business, because if not, it will likely have a limited life.

With that in mind, for us it’s all about open banking. We launched our first product recently and we will continue to hire people to support our development plans to build an interconnected network between all the banking systems, not just the UK. Our focus is ultimately about building more of a global payments platform whereby merchants can access it and use it to collect their payments in different countries.

We really want to scale our international business as well. As a CFO, I have the benefit of 18 years scaling a business at Interoute. When I first became CFO there, my team was approximately 30 people and our revenues were zero. Overtime, my team grew to 250 people and our revenue was £700m. I clearly learnt through that journey that I needed to build a team around me and delegate, and as the business grew, the time spent with the board and external debt investors began to outweigh internal issues.

I am really excited to take GoCardless on a similar journey. I have an amazing team who support me and I am enjoying passing on my experiences to more junior members of the team.


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