In this episode of Controllers Classified, host Erik Zhou sits down with Jeff Arensman, Controller at Bloomerang, to cover two important topics: building a finance function from scratch and the role of finance in acquisitions. For Jeff, the two are inextricably linked at Bloomerang. As the first finance hire at the company, his first task was supporting an acquisition that needed to close in just three weeks.
In this episode of Controllers Classified, host Erik Zhou sits down with Jeff Arensman, Controller at Bloomerang, to cover two important topics: building a finance function from scratch and the role of finance in acquisitions.
For Jeff, the two are inextricably linked at Bloomerang. As the first finance hire at the company, his first task was supporting an acquisition that needed to close in just three weeks. He then quickly turned to building a strong foundation for the accounting and finance practice at the company through new processes, tools, and technology. Jeff covers how he spent his time in the first few years at Bloomerang, including how he approached team building, and then turns to his current priorities now four years in at the company (a big NetSuite implementation!).
After sharing how he approached building a function, Jeff does a deep dive into considerations during acquisitions both on the buy and sell side. He details his extensive experience in acquisitions and highlights some of his best practices and learnings - including how important it is to add nuance and context to the models that bankers develop during the due diligence process.
The episode closes with Jeff sharing the deep detective work he had to do to get to the bottom of one of his weirdest company expense moments early in his career.
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0:00:01.6 Announcer: Welcome to Controllers Classified, the podcast where we take a deep dive into the dynamic world of controllers, accountants, and finance leaders and hear how their ever-evolving roles are redefining accounting and the future of business. And now, here's your host: Erik Zhou.
0:00:23.4 Erik Zhou: Welcome to Controllers Classified. I'm Erik Zhou, the Chief Accounting Officer at Brex, and today I'm honored to welcome Jeff Arensman, the Controller at Bloomerang. Jeff was the first accounting hire, first finance hire at Bloomerang, so we wanted to break down his approach to building the function from the ground up. We'll also touch upon preparing for an acquisition from both the buy and sell side. With his experience from previous employers, we have a lot to cover, so let's get to it. Jeff, how did you get started in the field?
0:00:54.2 Jeff Arensman: Well, I was in college, and to be honest with you, I didn't know exactly what I wanted to do. I loved numbers, and I loved business. And so I went to Indiana University, and they have one of the best business schools in the country. And so, you know, that was just kind of my path. I thought, well, I'm going to go give this a try. And actually, my accounting class at IU, my first one was my first exposure to accounting at all, was a 100 level class, and I loved it. I did well, and from there I just kept going, and again, just kept getting more interested in the business world. You know, obviously accounting is a big part of the total business curriculum there, but it really keyed on that and made that my specialty. Also did finance there, took some really cool classes, investment banking, and that sort of thing. But still, accounting was what I did best, and I enjoyed the most. And then, you know, as you graduate and you get out into the field, you know, accounting is just a small piece of the overall part of the business.
0:01:55.2 Jeff Arensman: And I think as I grew in my career and just not thinking everything, debits and credits, but how everything affects the business as a whole, it's really set me up well for my career and, you know, that's, I get questions on from people relatively young in their career, and what can I do to, you know, propel myself forward and things like that. And I give them the same feedback and that's, don't think of things transactionally. Always think of the big picture. How does what you're doing here, you may only have a little piece of the puzzle right now. Right? But how does it affect and make the whole puzzle come together? That's important. And if you can understand that, you know, the sky's the limit. You can do whatever you want. Accounting is so important. It's a basic building block of the whole business function.
0:02:42.6 Erik Zhou: I wanna talk a little bit about your early stage of career. So, you went to Indiana University, you got your degree, I think you went straight into industry to do accounting work. You didn't, me and a lot of the folks that I came up with, I mean, I went to a Big Four, but other folks that I now work with, they went through some accounting firm, etcetera. That's kind of like a good training ground. What I've, the perception is that if you go straight to industry, sometimes you're not getting the broader experience that you might want out of school. But I mean, maybe, I mean, I'd love to hear it straight from you, like what it was like.
0:03:16.2 Jeff Arensman: Yeah, sure. Actually, my first job out of college, I don't talk about it a whole lot, but was in the federal government, and I worked there for one year. Great experience. But I knew within a month of starting there, this wasn't going to be for me. I went to business school to learn how to make money, not spend money. So I stayed with the federal government for a year and then I went, I moved to Chicago and I got a job at a software company. And that's what I call my first real job. But I don't think I could have been put and gone into a better place to start my career. When I started at, Infor was the software company I started at, we were about a $700 million business. And I stayed there for eight years. And when I left, we were what, 2.4, 2.5 billion.
0:04:02.0 Jeff Arensman: And so it was just acquisition after acquisition. And how I learned best is just kind of being thrown into the deep end of the pool and trying to swim. And that's basically what it was there. And I had a very good mentor who allowed me to just, you know, go and run with things. And when I needed to be trained or taught, I did something wrong, he told me, oh, here's what you did wrong, here's what you need to do to fix it. But he really let me do things on my own, and I really learned things well that way, you know, system-wise. And that's how I kind of got started. And through M&A I mean, we were really humming along, especially after the Great Recession, things were very cheap, and so we bought a ton of companies.
0:04:46.7 Jeff Arensman: Probably there was a time point in time we were buying like one a quarter. And so, buying all these companies so quickly, there's no slowing down, so you just got to keep going. And seeing not only what we were doing internally and improving our processes and our systems and everything internally, also getting the exposure of seeing what other companies were doing, especially what they were doing wrong, was helpful because then I brought them in and then you put them into your processes that are working well. And I think having that experience 10 years ago, or whatever it may be, helps me now because I've seen companies that are not set up well internally. And so it's given me, okay, here's what doesn't work well, and here's how I'm going to do it differently.
0:05:37.2 Jeff Arensman: And that's what's helped me really build out, the finance functions at different companies is that, like, I've had so much exposure to see what isn't working that, like, I know what does work. And so it's setting that up. And then again, like now it's, we go buy a company. I understand what they're doing, you know, in diligence I'll see how they're doing, what the processes are, things like that. But the whole time I'm thinking, here's how we're going to do it when we bring it in here, because this is the proper way to handle it. So it's that experience, you know, very early, junior in my career and having that experience is what's able to, given me the knowledge to, to do what we're doing here at Bloomerang today.
0:06:19.0 Erik Zhou: I'm hearing two things. I'm hearing a very entrepreneurial attitude, actually. So even though you were working at a pretty established company, you kind of dove in headfirst, and you would work on, sounds like you would just work on different accounting processes, and your manager or mentor would let you just figure it out, Jeff, and let me know if you have any questions. And that takes a certain character. I think for a lot of people coming out of school, sometimes it's not. That's not always the best kind of environment for them to thrive. But for you, and the right person, it's certainly a great place to learn a lot and thrive. And then the second thing I heard from you was, you know, what's interesting is, going to an accounting firm like I did, I got a lot of exposure to a lot of different companies. But that's because those were all my engagements. I would do different audits throughout the year and also rotate across the engagements throughout my career. So I also had the experience. You were buying companies every quarter, looking at their accounting processes, and you were kind of also getting that experience. So that's really interesting.
0:07:11.8 Jeff Arensman: Absolutely. And you know, that's how, I pay it forward. And as I now hire, I'm looking for people who have the same mindset and thought process as I do, and especially being at a private equity-backed, you know, high-growth SaaS company, you have to have it. We don't sit still here. You're either getting better or you're worse, you're never staying the same. So we're always getting better here. And so, you know, I'm finding the same type of person who has that growth mindset, who has that, you know, roll up your sleeves, dive into things. That's what I look for. Because when I do bring them in, that's how I train them as well. Is giving them things and having them struggle through it. And again, it seems to have worked. Now it does take the right person, as you've said. But if I can find that person, they excel tremendously, because again, they're getting that exposure, do so many different things, and they're growing in their career so that they can be the next, you know, Controller or whatever it may be. I always tell my employees, I don't care if it's with me here or somewhere else. My job, if you want to, is to get you to that next stage in your career. And so I'm going to do everything I can to be able to get you there.
0:08:25.6 Erik Zhou: I love that. I say the exact same thing. That's hilarious. I mean, I always think I want the best and brightest. I want the folks that are the most entrepreneurial, the folks that are the most agile in terms of like working in a basically a fast-paced environment. Like your company, like my company. You know, that's what it really takes. And then what I think is like, well, ultimately, if I'm hiring these kinds of people, they're going to wanna be Controllers or Senior Manager, whatever. Like they're going to wanna rise in their career. That place might not exist at Brex today. I'm okay with that. And for me, like, I'll get the next best athlete, and I'll help you as much as I can to get you to the next stage as possible 'cause that's just how it is. Tell me a little bit more about what Bloomerang is. And also, you know, you were the first finance hire there, I think. So what was that like?
0:09:13.8 Jeff Arensman: Yeah, so Bloomerang, we are a donor management platform. And that's what Bloomerang was when I started. You know, we were a CRM for small and mid-sized nonprofit organizations. It'll be almost four years actually next month that I've been here. We're kind of transforming ourselves from a CRM solution for small, midsized nonprofit organizations to becoming the market leader of all things nonprofit fundraising for small and midsized nonprofits. So, again, when I started four years ago, we were just a CRM company, right? And then I started, and within three weeks we went out and made another acquisition. So my first 90 to 180 days was a little chaotic. So we made an acquisition three weeks after I started. It was another CRM company, but they also had a fundraising platform. Right? So that was the play pairs Bloomerang, the CRM, with a fundraising platform, making kind of an all-in-one solution. And then since then, we've added on volunteer management, which is our customers love. And then last December, we added on Qgiv, which expanded our fundraising capabilities. Also added auction peer-to-peer type solutions as well. So again, we're trying to become the market leader for small and mid-sized nonprofit organizations.
0:10:30.1 Erik Zhou: We're kind of trying to be. Sounds like vertical SaaS, almost like, you know, there are a lot of companies out there that especially focus on the entire platform for school or education or for a construction company or for a hospital. Sounds like, I mean, that's great, I love that. Yeah.
0:10:44.5 Jeff Arensman: That's exactly right. And our customers love it. Our customers love that. We, you know, want a one-stop place where I can get all I can fulfill everything that I need to do for my donors. I can go to Bloomerang for that. And so that's what we're trying to build here.
0:10:57.8 Erik Zhou: That's awesome. And so you were the first finance hire, if I'm not mistaken. What was that like? Well, what does it take to succeed being the first finance hire at a company like Bloomerang?
0:11:07.9 Jeff Arensman: So first finance hire here. And again, we had talked about in the interview process that they were in diligence but weren't sure if they were going to get the deal done. So I started, and then it was, oh yeah, we're gonna get this deal done. And it's closing in three weeks. So challenging, to say the least. But the good thing was, so I started, and then about a month later, Steve Isom, who's now, who was the CFO and is still the CFO of Bloomerang, started as well. So it was the two of us, and it was. We were doing again, we were doing double duty. We were trying to learn the organization as it was now and then we were also trying to bring in this brand new organization at the same time. So, as I think of the first 90 to 180 days, I probably didn't get to do as much blocking and tackling as I wanted to do. It was like, let's keep the lights on and let's get this new company that we just bought kind of integrated into our process that we have at this point. And, that took probably 120 days or something like that to really get done.
0:12:09.7 Jeff Arensman: Then it was, okay, we've got them both stood up. Now I've got to start putting things in, like simple things that didn't exist. Like, there was no closing checklist or task lists. There was no... We were still trying to figure out that we didn't even have a good report that would give us, like, what are our bookings for the month. It was kind of managed on a spreadsheet, but that was it. So all things that I think are not unique to companies at that size who don't have an established organization we ran into. So, yeah, over the first, I would say year, it was getting the bare bones just put in place. And then after that, then we kind of go, and, okay, here's how we can scale this thing and hiring people and getting technology, what can make it better. But it took quite a long time just to get things to a point to even say, okay, now we can start doing the things that we need to do in order to scale this thing up to wherever we wanna go.
0:13:09.2 Erik Zhou: So you had a lot of experience, I think, just from previous companies. I know you worked at a different acquisition before, and in your first company, you were acquiring a lot of companies as well. In that first year it sounds like you were putting together scalable processes, or at least thinking about what the scalable processes will be after you did the integration. What about when you were making your first hire? Like, at what point do you know, okay, now is the time I can start to scale my workforce, given what I've built here?
0:13:37.6 Jeff Arensman: Yep, it was at a point where I knew the processes were good, the processes were tight, and now I'm comfortable bringing somebody in and teach them to that process. Again, going back to what I said earlier, being part of so many acquisitions, I've seen the wrong way to do it. Once I felt comfortable that okay, this is what it's supposed to look like, then I went out and started making hires.
0:14:04.4 Erik Zhou: What's something that like, like you, you saw that was maybe done incorrectly and you knew like it's supposed to look different and what does it transform into, if that makes sense?
0:14:14.7 Jeff Arensman: Yeah. So I mean, a good one is we were on, on for example, billing system. We were not... We're a SaaS company. We have a lot of mid-contract changes. Something as simple as we weren't doing mid-contract changes the proper way and therefore our revenue wasn't exactly being rolled out correctly. And therefore, like at that point in time, I was doing retention calcs so that I could give it to Steve, and we could do the board decks and things like that. I mean, there's a great example too, like just simple billing processes, making sure that was tight enough that we could report out correct metrics, things like that. What else we had? One thing that I hate is like we were still writing hard-coded checks at that point as well. We weren't leveraging simple things like ACHs, and there was check stock that in my opinion wasn't locked up properly. And then we were writing checks to pay the light bill or whatever it may be. I'm like, no, we don't need to be doing this. Just simple silly things like that that you just got to clean that up. I don't want somebody to come in and who's more junior in their career and see that and think, oh, that's okay, that's not okay to do.
0:15:31.4 Jeff Arensman: It's not the right way to do things. And so again, it's just little things like that. Getting things to a point where I say, okay, things are clean, things are running well, and I can teach and train somebody to this because it's the right way to do it. Now let's bring somebody in.
0:15:46.7 Erik Zhou: One of the things that I've and getting resources is always a negotiation, even with when you're within the finance team itself. In fact, you might wanna be the role model, so to speak, for the rest of the company, right. So you just hold yourself to a higher standard in terms of trying to do more with less. You know, when you were thinking about building out the team and getting the resources you need. And even on this ACH example, I'm sure there was an investment that you had to make to maybe get some SFTP connection going between your bank account and whatever payments, software, etcetera that you had in place for your invoices in AP, you know, how did you get the, the backing to make these investments for the future, so to speak? Like, what did it take to educate your cross-functional partners or even your boss, etcetera? Yeah, on these needs.
0:16:38.4 Jeff Arensman: The good thing is our private equity partner, JMI Equity, was well aware of the back-office issues. And that's why one of their first things to do when they came in was to hire a Controller and a CFO. So having their backing and understanding, we were fully basically given a, you know, a thumbs up that you need to go do this and you need to do it quickly and going through diligence, you know, when Steve and I came in, we had quite a list of things that came up in diligence that had to be resolved before down the road there was any sort of other transaction that had to take place. And so we just started, okay, where's the things that we can knock out sooner rather than later? And boom, let's just start knocking those things out. So, a huge fan of our partners, JMI Equity, they were fantastic. We had their full support and that was, you know, that was helpful.
0:17:32.7 Erik Zhou: And so, yeah, folks, you kind of had a leg up because the folks already knew from a business standpoint what a good process looks like, they hired you to do this. And so, good reason. Yeah, makes sense.
0:17:43.7 Jeff Arensman: Yeah, absolutely. I mean, diligence was, you know, they saw everything in diligence. You know, I mean, one of the things that came up was just, you know, everything kind of funneled to the CEO then because there was nobody really who could do it. We had a billing person who was kind of doing some accounting clerk-type things, but everything funneled to the CEO, which takes time because they're supposed to be running the company. And so, you know, all came up in diligence. Everything was noted. And then, you know, once we came in here, it was, all right, guys, go do this, get this done.
0:18:15.4 Erik Zhou: So now that, so you've been there for almost four years, you're going to hit your four years next year. What's changed about your priorities in the time that you've been there? You built a lot in your first year. Sounds like you had to hire out the team. Now you're four years in. What's the focus?
0:18:31.0 Jeff Arensman: Yeah, it's, you know, scaling the company to a hundred million and beyond. And what works and what we did when we started and built it up, isn't gonna work to take it to a hundred million and beyond, with these acquisitions we acquired Kindful and then we acquired this other entity in Canada, and then we acquired Qgiv last December, they all had their different ERPs and so I didn't wanna create a problem that didn't exist at the time. And so, you know, before we acquired Qgiv, I just ran every entity out of their existing QuickBooks entity. I ran QuickBooks into the ground, right? But as you scale to a hundred million and beyond, you can't do that. Right. And so we actually just finished up our net suite implementation about 30 days ago.
0:19:21.5 Erik Zhou: Congratulations.
0:19:22.2 Jeff Arensman: Yeah. And so things like that are what you need to do as you scale up.
0:19:28.1 Erik Zhou: When did you know, when did you know you had to move to NetSuite? Like what was like the biggest breaking point?
0:19:33.0 Jeff Arensman: Yeah. Again, I wasn't gona create a... Could we have gone to NetSuite when we were $30 million? Sure. We could have. But there wasn't a problem to solve at that point. We could get what we needed out of QuickBooks at the time. We had FP&A person at that point. They got what they needed out of QuickBooks. There was no issue there. When it became an issue is when we went from two or three instances of QuickBooks, made more acquisition and now we're at six or seven subsidiaries, whatever we are, then it becomes a problem. I wanna be able to run my consolidated financials at a quick click of a button. Then it becomes a problem. And so it's like oh, all right, this, It's time now. It's time. And so made the decision as part of the Qgiv acquisition last December and nine months later we're up, we're going. And it was honestly...
0:20:24.6 Erik Zhou: That was the reason that Brex moved to NetSuite too, a long time ago. We had to do it earlier because we ended up spending up a lot of subsidiaries as part of financing our receivables. So we ended up having a very complex legal structure, just like in our first couple of years. And so one of the big drivers was the consolidation that you talk about. I didn't want to run 12 different instances of QuickBooks across all the entities. So, yeah.
0:20:46.9 Jeff Arensman: No. Yeah, exactly. Exactly. So it's, you know, as things pop up as problems, you know, then and solve them because again like when we were 30 million, could have we had gotten NetSuite? Sure. But I had other things that I wanted, like I wanted to optimize our billing system. Right. We, in conjunction with hiring our first staff outside of myself, we got a new billing system and getting that billing system up and getting it optimized, making sure the customer portal was good. And, you know, you name it. All these other things were much more important than things like that. So again, as you scale more problems, more things to solve, and they're different than they were when you were 15 million.
0:21:22.5 Erik Zhou: Now that NetSuite's implemented, what's on the horizon? 'Cause like you can do a lot more with NetSuite There's a lot more integrations. There's a lot of other automation that you could do. Like that's what I found, at least, for Brex. I don't know what's on docket for you guys.
0:21:34.8 Jeff Arensman: Yeah, we need to optimize more front end our Salesforce or Salesforce shop. We need to optimize that more for our sales team because it all flows downstream. And we don't, we still don't have auto provisioning. And so like my team is still provisioning databases as new customers sign up. And so that whole process needs to get streamlined next year. So that's a big one. Consolidating banking for some of these acquisitions. I wanna get that done next year.
0:22:03.0 Erik Zhou: 900 bank portals, like... [laughter]
0:22:07.2 Jeff Arensman: No, it's annoying. It's annoying. No. Yeah. Look, I, again, private equity backs high growth SaaS company. M&A is always on the horizon. Right. And so I've got to get this stuff done because I know there's more things coming down. And again, because we have good processes and we have good people and our technology is getting better, it's just more data and just put all that data into what we're already doing and we're just gonna keep going.
0:22:33.2 Erik Zhou: We've been mentioning all these acquisitions, both on buy side and sell side that you've been a part of. Can you give the audience just like a technical walkthrough of let's start with sell side, front to back. Like what is it like when you're starting to engage in a sell side process? And what is it, what role did you play? And maybe also talk about the other side too, that'd be helpful.
0:22:53.2 Jeff Arensman: Yeah. Sell side, I generally have bankers who kind of walk me through the process, which is good because on the sell side, you know, it was my first real foray into it. So having them at our side was very helpful for me. I found that having a really good model, you know, bankers may put together a model for you and I found that to be not ideal because as I'm talking with potential acquirers, investors, you know, how the bankers are looking at it is not how we're actually running the business. So, and it actually goes to how I started like really getting involved in FPNA and things like that is like, I took our bankers models and I reversed engineered them, kind of learn how they were doing things and how they were reflecting things in their model. And I reversed engineered how we were actually running the business and being able to then take that to investors and potential strategics, hugely helpful because then I can really feel confident that I'm talking to this in a proper way and I can back it up as well.
0:23:57.4 Jeff Arensman: And you know that... It was hugely helpful, you know, having that confidence from others that you really know what you're talking about and you're not just, telling some happy story that's really not there. You can actually show the numbers to back it up. Here's how we're running the business. Here's the trailing 12 or 24 months. And here's what it's gonna look like going forward and really being able to talk to it, you get that confidence and trust, hugely helpful. I mean, yeah, once you lose that trust and they're like, eh, they don't really, I don't trust them. Like things generally go sideways.
0:24:33.8 Erik Zhou: I think it's really important that even in our FPNA model, ultimately, right? There's a bunch of formulas that spit out what our P&L projections will be month to month over the next call of two to three years. And there's all this whole process where we manipulate, "a set of actuals" historically, and then that's how we use to forecast the future. And then, yes, those are the actuals. They were manipulated somehow to get to the forecast. And sometimes what you'll see is that there's this cell with just like a number that says 102.6% and it's like, well, where did that number come from? It was like completely hard coded, etcetera. And I mean, I experienced that a lot. Like in my audit days when I was auditing folks for their goodwill and humming like, all that stuff.
0:25:14.7 Erik Zhou: But even at Brex, like, like those are the numbers that, okay, there was someone that thought about why this is the right number. In fact, there might be another spreadsheet, right? That was used to calculate this number, but we couldn't bring that spreadsheet into this particular workbook 'cause they would have gotten too big, etcetera. There's all these reasons for it. But when I found out like, oh, this is the reason why it's 102.6%. This is how we quantified these qualitative aspects of how we run our business. Right. In my head, I could visualize that, okay, if I had these inputs in terms of like the go to market motion or these kinds of, this kind of productivity from our sales team, etcetera, then you get to this number that, yeah, it gives me definitely an air of confidence when I talk to other people about the business too. And then I think that carry just naturally carries over like you're saying.
0:26:02.1 Jeff Arensman: 100%. 100% Yep. Once they lose trust or, you know, get a little unsure of what you're, you've provided, it just, things go sideways. So you've gotta be able to generate that trust and confidence.
0:26:16.1 Erik Zhou: What about, so now that you described the business to potential investors or buyers, etcetera, you know, once you get, so there's a term for your process, you know, you get that, there's that gets executed. What's next? Like what's the rest of the process to kind of consummate the deal?
0:26:33.4 Jeff Arensman: Well, then the hard stuff comes in, which is diligence. Although, you know, that's when they really get into the weeds, but again, going back to being part of so many processes on the buy side, I generally know what they wanna see and how they wanna see it. So really putting together great deliverables, that's the next step and getting through there. Again, if you run things tightly, it generally is like a check the box exercise. Especially in the startup stage, are there things that they find that could be issues? Sure. A lot like sales tax is a hot button item these days, right?
0:27:11.8 Jeff Arensman: I mean, if you're a five, $10 million company, it probably, you know, cash is an issue. It probably doesn't make sense to do a sales tax study and remediate sales tax exposure. It doesn't make sense. So things will be found and brought up. But again, if you're putting deliverables together correctly, and you're talking to them and generating that confidence, diligence is pretty easy. And then yeah, putting purchase price agreement together and going through all your legal documents and things like that, which take a lot of time. But again, in the end, it's so much fun. It's totally worth it.
0:27:50.4 Erik Zhou: Tell me a little bit on the other side then. So when you were doing the buy side diligence on a potential acquisition target, did you ever get to a point where like the accounting or like the books and records due diligence, kind of block the deal or like there was some issue that like blocked the deal?
0:28:12.8 Jeff Arensman: I have not. I have not. Generally, we get a push through. We have one where I was concerned at some things. So we put a side some escrow to cover that, some extra escrow to cover it. And we ended... My suspicions were true and we ended up tapping the whole escrow. But, you know, that's why, you know, I tried to as much as possible get into what they're doing during diligence. I wanna know how they do it and why. Because getting into that level, by the time the deal closes, I already know where the skeletons are. And I can find those fairly easily. And then, again, by the time the deal closes, I'm already thinking, here's how I'm going to integrate into what we're already doing.
0:29:00.4 Erik Zhou: So, one thing that I found also, like, and I didn't do as much of the transaction services work when I was at the firm, we have done a couple of acquisitions at Brex. I do think oftentimes when you're buying a company, especially like if the company that you're buying is a growth stage company, you're almost like a venture or early stage investor yourself, right? You got to believe in the story. You got to believe in the qualitative and the qualitative sometimes are very difficult to build projections for like four years out. Like that's what you're really buying. It's the hope that like, it'll turn into that. I don't know about unicorn, but just like a much better ROI than just what the numbers may suggest.
0:29:43.3 Erik Zhou: And so I think that's gotta be part of it. Like at the end of the day, like we're checking to make sure there's no like fraud, I think, or like, like basically the books and records are pristine enough that I can integrate them into my process, but I don't know if like, you know what I mean, 'cause they probably already seen the numbers or heard them from the other CEO or the founder, etcetera, and kind of made that decision already.
0:30:03.9 Jeff Arensman: Yeah, a hundred percent. I mean, if I think back to when we sold our business, I worked for cybersecurity company, we were MDR provider and we sold our business to Sophos. They had the vision and Joe Levy was on our deal. He was the CTO at the time. Now he's the CEO of Sophos. Just brilliant guy. And that's exactly what he had. He had the vision of what we were doing, putting into their existing, their heavily, if not all channel, putting our service into their channel. And it's been amazing. I mean, we were a small scrappy startup and it'll be five years now and they have over 30,000 customers in five years. So like it was his vision, right? So like it was important the numbers that I were providing, right? What you just said, make sure there's no fraud and things like that. But it was what it could be trumped everything else. And that's a perfect example of it.
0:30:56.1 Erik Zhou: And what it could be is hard to quantify.
0:31:00.7 Jeff Arensman: Yeah. Yeah. They, you know, one of my things that I had to do before, I left there was forecasting out three year headcount ramp model, right? We had SOC analysts and things like that. And so they wanted me to forecast out the next three years of headcount. I thought I was, it was crazy looking at these numbers. I'm like, there's no way they're gonna need these many people. There's no way they're gonna have these many customers. You know what, they ended up having more.
0:31:22.0 Erik Zhou: Wow.
0:31:24.1 Jeff Arensman: And it's just amazing. Once you're able to join two companies that really fit together, it's crazy how fast things can go.
0:31:33.5 Erik Zhou: Maybe just one more question while we're on the acquisition topic, but okay. So now that you've done the acquisition and whether you're on the sell side or the buy side, right? Like, I don't know, you have more buy side experience, but what does that post day one like, or that day one post-acquisition process look like? What are the things that you're focusing on to ensure kind of a smooth integration, etcetera?
0:31:55.3 Jeff Arensman: First thing I wanna do is I want to get standardization like chart of accounts, something as simple as that. So that going back to having three instances of QuickBooks or whatever it may be, when we consolidate everything downstream, it's easy to do, right? So one of the first things I always do with acquisitions is let's get the chart of accounts standardized so that we can do apples to apples here. And report...
0:32:18.1 Erik Zhou: And that's because you're also not gonna migrate all the data day one.
0:32:21.2 Jeff Arensman: No, that's correct.
0:32:22.1 Erik Zhou: So you have to have a key to move it over and consolidate. It makes sense. Yeah.
0:32:26.4 Jeff Arensman: That is correct. Exactly. So I wanna do that on day one. Right. And then it's, you know, getting from, just a month end close process. Like, okay, you know, some of these are so small and again, are outsourced. Maybe they don't even have a task list to close. Like, okay, just start putting a list together, everything that they do and how to, you know, and then get integrated in that and, generally, that'll take 60 days. Like I want within 60 days of acquiring somebody, the normal operations as it relates to accounting, I want it to be integrated in 60 days.
0:33:00.2 Erik Zhou: Are you on site with those folks? Like, and I know maybe some of your experience was during the pandemic. So maybe that wasn't possible, but are you going on site and checking...
0:33:08.9 Jeff Arensman: No, I'm not generally not necessary. Again, I've seen so many at this point now that I can, I tend to be able to figure things out. My staff is really good at that as well. And so, no, generally we just do it, you know, remote and get into things.
0:33:25.5 Erik Zhou: So you said 60 days, 60 days means like probably two month ends or so. So in that first one...
0:33:31.9 Jeff Arensman: Two month ends... And we have to do it because generally networking capital is doing 90 days. Right. And so you're as part of the networking capital, you know, making sure you've got all your adjustments in and everything like that, while you're doing that, you can also optimize your closed process at the same time.
0:33:47.3 Erik Zhou: Makes sense. So one thing that we always end our shows on, we have a segment called finance leaders are fun too. And you've kind of been around a lot of different industries, a lot of different acquisitions. I'm sure there's some stories, but we'd love to just hear from you. Like the funniest accounting debacle. The debacles are my favorite, personally. I also like accounting jokes as well. So I don't know if you have any to share.
0:34:11.4 Jeff Arensman: Probably one of the most debacles that I came across was, I was earlier in my career and there was expenses that were coming through by somebody at the C level that just didn't feel right. And he was a remote employee at the time and he was flying back and forth to the office. So there was some grocery store expenses and things like that to be expected, but something just didn't feel right. And I brought it up to my boss at the time and he went to the person and then they said, okay, I'll stop or I'll cut it out, whatever it may be.
0:34:44.5 Jeff Arensman: And it stops for, I mean, you know, a month or two. And then I started to see transactions go through on his card again, that just didn't seem right out of place. The timestamps were odd outside of working hours, things like that. And, you know, I brought it up again and it just kind of got dropped. I don't think my boss at the time really wanted anything to do with it. And it just really bothered me. And so, you know, I went to him directly and I said, Hey. I'm seeing this again, like what's going on? He's like, oh, I, you know, there was always an excuse. And so fast forward another week or so later, he's not even on site. And I see some transactions take place about 3:00 o'clock in the morning, at a grocery, was a grocery store or a drug store? I can't remember. And so the next morning I call and I said, hey, like I saw these transactions, like was this you? "No, not me at all. Not me at all. Better cancel the card. Wasn't me at all."
0:35:44.5 Jeff Arensman: And it still didn't feel right. But I did cancel the card and I thought about it all day. And I said, I'm gonna see if I can do something. I called the drug store and I got a manager who seemed very cooperative. And I said, "I have this transaction that took place at this time." I said, "can you send me the picture on your security camera at this timestamp?" And they were super cooperative and they said, "sure, give me an hour." And an hour later, I had an email in my inbox with the picture and it was my employee making the charge. I called the store back. I said, "this is perfect. Exactly what I needed." I said, Can you give me the receipt?" "Sure." So they sent me the receipt of what he was buying and he would buy, you know, a pack of gum or something like that. And then he was buying hundreds of dollars of gift cards. So he was kind of stealing money from the company.
0:36:51.3 Erik Zhou: Oh, my God.
0:36:51.3 Jeff Arensman: To masking it, that you're buying one thing but buying a bunch of hundreds, hundreds of dollars of gift cards. And so I had everything I needed. At that point, I had a picture, timestamp and receipt, and he had to be terminated. So I went back and I just looked at all the transactions that had taken place over the months and I think it ended up being like 15,000, 20,000 before I finally put a stop to it. But again, earlier in my career, but you know what, it just didn't feel right to me and I'm like, no, we're gonna figure this one out. And so that is my biggest expense report debacle.
0:37:29.2 Erik Zhou: That's why you need receipts and that's why you need automated receipts that Brex provides. I'm gonna do a little spiel here just for Brex.
0:37:36.9 Jeff Arensman: Please do.
0:37:38.3 Erik Zhou: Yeah. So like people get per diem when they travel. Right. And so yes, per diem is like 75 bucks. Maybe like for a lot of companies that's immaterial, but at scale, if you have a lot of people traveling in your company, that's $75 adds up. And the thing is like, you know, at the end of the day, there might be someone that call you have a $75 per diem. You go to the drug store or grocery store. You buy like a bottle of water as part of your per diem. What's to prevent you from buying that bottle of water, but also like buying a $50 gift card.
0:38:05.8 Erik Zhou: Right? And it's not for food. You can probably get by with the other 20 bucks the rest of the day. Right. And like you spend the gift card on something else, like you're trying to just maximize value to yourself from the per diem. And so at the end of the day, though, like, you know, sometimes capturing all the receipts as an employee, and especially the fact that most of the employees are probably good behaving employees and are not gonna do stuff like this, or you're going to really punish the entire population and force them to manually capture receipts, when you're really only trying to solve verses select few that you know are gonna be there if your company is big enough.
0:38:37.2 Erik Zhou: And that's where, yeah, like, so Brex, we automate the receipts because we have a direct connection to MasterCard. And so when you buy stuff at the drug store on the card, we will give you that detailed itemized receipt capture attached to the expense on the dashboard so that you could actually see, oh, this is something weird. You see the itemization is like this bottle of water and then like something else for Lowe's or something, or it could be, whatever, an Apple gift card.
0:39:03.5 Jeff Arensman: Yeah, it would have been good to have that, but no, this was a kind of a legacy AMEX card program. And so unfortunately, we did not have that. And this is what happened. So I thought my detective skills were pretty good there and we had to take care of it. But...
0:39:18.5 Erik Zhou: You've got to be pretty smooth talking to get a random drug store to just give you the security camera footage, though, right? [laughter]
0:39:26.0 Jeff Arensman: And I found a cooperative person. Yes. Yes.
0:39:27.7 Erik Zhou: That's great.
0:39:29.7 Jeff Arensman: But again there was... It was continuing to happen. So if it would, that person wouldn't co-op, I would have found one. I would have found somebody.
0:39:34.6 Erik Zhou: Yeah. Jeff, it was been a pleasure. Thank you so much for taking the time to be on the podcast today.
0:39:41.2 Jeff Arensman: Absolutely. Appreciate you having me. Take care.
0:39:45.3 Announcer: Thanks for tuning in to Controller's Classified, presented by Brex. Brex is an AI-powered spend platform with global corporate cards, expense management, reimbursements and travel. Visit brex.com and follow Brex on social to see how they can take your accounting game and your company to new heights.