86. Are You Making These Huge Financial Mistakes in Your Business? (with Pete Chrobak of Duncan-Parnell)

 Karthik Chidambaram: Hello everyone. Welcome to a brand new episode of the Driven by DCKAP podcast. We have a very special guest today, Pete Chrobak, Chief Financial Officer of Duncan-Parnell.

Pete thank you so much for joining me today and excited for this conversation.

Pete Chrobak: Yeah, I'm excited to be here. Karthik.

Karthik Chidambaram: So, Pete, can you tell us a little bit about what does Duncan Parnell do and about your business?

Pete Chrobak: Yeah, so Duncan-Parnell was founded right after World War II and was a traditional print maker.

So blueprints, all that stuff, gear around kind of the construction industry. And over the last 75 plus years, we've evolved into a distributor of technology geared towards construction industry for surveyors. And our primary product is Trimble Manufacturing. Product of the surveying equipment, so geospatial, surveying, mapping, all that type of stuff.

We use drones too. We sell those. And we also have our traditional printing business as well still, and that's kind of evolved into signs and graphics. It's really a long elevator speech. All the stuff we've done in, in the past six months, we bought a marine construction dealer that also sells similar Trimble equipment and then also.

An ag technology company called Ag Technologies that sells autonomous equipment for tractors out in the field, and then also uses some of the other, you know, geospatial equipment to auto steer the tractors as well. So we have a lot of exciting stuff going on.

Karthik Chidambaram: It is exciting, right? So we talk to a lot of technology leaders.

And I'm really very interested to read. Right, because it's more of finance, right? Yeah. So you're the chief financial officer. Yep. I've always wondered, right? So what does a chief financial officer do?

Pete Chrobak: Yeah. So it depends on the size of the company, right? So a small business, CFO has their hands in a lot of different things 'cause they typically have the finance and accounting role.

They have hr, sometimes purchasing, sometimes IT and technology. Duncan Parnell's a mid-size company. So I get to have my hands in all those areas there. So I have to wear a bunch of different hats, flipping back and forth. And I don't really just focus on finance, right? And then my background previously was a controller of a company and I got very involved in the operations of how the distribution business ran.

So I, I think I'm kind of a more non-traditional CFO in the fact that I have a fairly strong operating background as well and get involved in technology too.

Karthik Chidambaram: I'm not an expert in finance. Right. So, but then controllers more like where you spend the money right. Is that, yeah, so

Pete Chrobak: the controller is like in charge of all the internal controls, right?

Segregation of duties, making sure the bank accounts are wrecked, the financial statements are right, they get all the numbers in the right place. So then you know what your profit and loss statement is at the end of the month, and you know where your balance sheet is at, and your cash position, inventory, things like that.

Karthik Chidambaram: We have a lot of startup listeners in our audience as well. So when does a company typically hire A CFO? Right. So let's say, you know, when I'm small starting out

Pete Chrobak: Yep.

Karthik Chidambaram: I don't really need a CFO, you know, I can do pretty much, you know, send invoices, receive invoices and all that. Right? Yeah. And then maybe, you know, I work with a tax consultant mm-hmm.

And get my taxes filed. When is a good point for a company? Invest in A CFO.

Pete Chrobak: Yeah, so I would say, you know, probably when you get to that 15 million ish range most of the time when you're a small business, I used to do a lot of consulting, right? You work with the tax guy, I was that tax guy. And then you start asking the tax guy more and more questions, right?

About your bookkeeping and other things probably means you need to hire an accountant at that point in time, right? So you hire your accountant, they can kind of get everything buttoned up. You keep talking to the tax guy and then once you're around that 10, 15 million range and your accounting person doesn't really.

Isn't able to take you to that next level. It's about the time to start thinking about either, you know, maybe an outsource CFO where you're only using them maybe for 10 to 15 hours a week, and as your business keeps scaling, you can bring in somebody full-time.

Karthik Chidambaram: And you were a tax person, right? So you were helping multiple companies.

Yeah. But then you desired to get full-time into one company, right? Yeah. So why did that transition happen? I'm just curious. Yeah. So I,

Pete Chrobak: I spent 11 years in public accounting and you know, public accounting, you know, a lot of tax. Small. I worked for smaller firms, so I got to have my hands in audits, bookkeeping, consulting work.

So I really enjoyed working with small businesses, primarily family owned businesses, and that's where you typically get three or four brothers and sisters in the business. They're taking money from mom and dad. There's a lot of personal stuff going through there, but it was enjoyable to have conversations with them and help them run their businesses and kinda get some of that stuff out of the way.

So after 11 years in, I didn't wanna become a partner. That wasn't where I wanted to go anymore, and I started looking for roles as controllers and privately owned businesses. In that mid-size area. 'cause that's kind of good entry point from public accounting into private industry.

Karthik Chidambaram: So let's say you become a CFO of a company, which is bleeding, not doing really well, right?

Yeah. How do you go fix it?

Pete Chrobak: Yeah. Well, I mean, at first you've gotta figure out what, what are the problems that are existing, right? Mm-hmm. So cash is king, you know? So CFO's worried about cash. The owner of the business should be worried about cash, but sometimes they get caught up in, Hey, our sales are really good.

Right. Your sales could be really good, but you could be buying too much inventory, right? So if you have too much inventory and it's not turning fast enough, then that might be causing you to, you know, bleed your cash. So you gotta get your inventory in order, which means you might have to sell some stuff below a certain price to get cash back in.

So I'd probably start looking at inventory, looking at other things they're paying for, trying to cut expenses, and it's hard to ramp that type of stuff down if you have a lot of bad habits.

Karthik Chidambaram: But cutting expenses is probably one of the first things you would do, right? Because especially if the company's bleeding.

Pete Chrobak: Yeah.

Karthik Chidambaram: There's no other choice but to,

Pete Chrobak: yeah.

Karthik Chidambaram: Cut a lot of what, so

Pete Chrobak: the hidden thing is always inventory, right? If you're in a business where you're selling product to somebody mm-hmm. Inventory's typically your number one. Potential problem. But then, yeah, the expenses too. You know, do you have a, you know, really expensive car that you're paying for?

Are you buying people? Vehicles don't, that don't really need 'em in the company? Is, are people taking people out for meals a lot? There's a lot of low hanging fruit that, you know, people could look at and kind of dive into and you're typically not gonna get that from your tax guy or CPA firm 'cause you're typically bringing them the information when you need your taxes filed.

They're hurrying up and doing the taxes and they're not getting a chance to spend time with you on those things that could be meaningful to your business. So reviewing a cash flow statement would be a good thing to do, right?

Karthik Chidambaram: Absolutely. No, I can totally relate to that, right? I mean, even when I file personal taxes, right?

Mm-hmm. So the tax guy is really, really busy.

Pete Chrobak: Yep.

Karthik Chidambaram: At that point of time in the year. So it doesn't really have too much time to set that

Pete Chrobak: Right.

Karthik Chidambaram: Look through everything and we are also rushed for time. Yep. Hey, just go file it right? So I can Totally. And

Pete Chrobak: when you're operating your business, you're busy all year.

You don't wanna make time for your tax guy to talk to. But really in like July, August, September, you should be talking to them about that year's taxes.

Karthik Chidambaram: And you talked about cash skiing again, cash escape, yes. Right. So I think this is something everybody understands. Yep. But how much cash does one need or it depends.

So,

Pete Chrobak: yeah, I mean, so if you're looking at your business and you look at your expenses, you know, it's always good to have, you know, three months or so of cash on hand. Right. Even if you're in your household. You wanna have some savings aside. In America, we all kind of live paycheck to paycheck, but we all should really have probably three months of cash on, on hand.

And then that way if something happens, you kind of have enough to get you through the next few months before you may have to go talk to a bank or have a more major problem.

Karthik Chidambaram: Even for business, three months of cash is good enough.

Pete Chrobak: Yeah, that's where I think I would start, right? Mm-hmm. Depends on how profitable your business is, but the more you can hoard ca, look at apple.

Apple has a ton of cash, right? Mm-hmm. And you know, and that's what a lot of really healthy businesses do. They have a lot of cash on hand. So the more you have, the better. But, you know, if you're running a small meats mid-size business, you wanna pay yourself and some people, you know, just wanna run the business just to make a good profit, have a good life.

And, and that's really where you kind of need to look at it at.

Karthik Chidambaram: Let's say you have a lot of cash, right? Sometimes it's really tempting to invest, right? Hey, you know what? Cash is sitting. You know, I don't wanna, I mean, I wanna really do something with it, right?

Pete Chrobak: Yeah.

Karthik Chidambaram: So typically right as a CFO, I mean, obviously, you know, let's say, you know, you need three months of cash at hand to run the business.

Okay? I have that. But then I have more cash, right?

Pete Chrobak: Yep.

Karthik Chidambaram: So how do you invest that, right? I mean, do you put that in SP 500

Pete Chrobak: or, it depends on what you wanna do, right? Like we're, we're very growth minded at Duncan Parnell, right? Mm-hmm. So we've been looking for businesses to acquire. We keep our eyes open, right?

To see who there is, and we can take that cash and go buy a business. It makes a lot easier if you don't have to finance the deal. Smaller businesses may not do that, but some of them do. But you could also open up investment accounts as well. And you can also, you know, invest back, you know, if you're an S corporation, right?

You can do distribution and then invest it personally. So just depends on kind of what you wanna invest in growing your business or making money for yourself

Karthik Chidambaram: and at Duncan partner, right? So when you acquire a new business, you guys acquire a lot of companies, right? Yep. So when you acquire a new business.

Is it mostly just cash acquisition or do you also do debt, right? Yes. So you borrow it from the bank as well? Yep. Which is a better strategy or is it, does it depend on the interest rate and everything? Or let's say, have cash in hand? Yeah, interest rate is very low. Yep. So what do I do?

Pete Chrobak: Yeah, so I mean, I like when the investment plays for itself, right?

Mm-hmm. So when interest rates were lower, it's nice to get, you know, a three or four year loan. Take that out, pay maybe 20% down, and then pay it back over the next three or four years with the operating profits that's generated outta the business. And now it's successful, it's paid off. The interest rates have been high for the last year.

So if the cash is available, we've used cash to pay for some of those acquisitions and then we, you know, we don't have the interest that we're paying on those either.

Karthik Chidambaram: And let's say if it's not profitable, right? So let's say, you know, I pay 20% down. Mm-hmm. Or 25% down to buy a business. Yep. And then. I borrow.

Yeah. Right. And then the interest rates are high. Right. But it's okay. I borrow because I like the business. Mm-hmm. Okay. But then if it doesn't generate enough cash to pay for itself

Pete Chrobak: Yep.

Karthik Chidambaram: Then that's not a good investment.

Pete Chrobak: Yeah, right. Well, that's what, yeah. So you could go into something right where you think it's gonna do well and it's not doing well.

And now if you have multiple companies, you may be putting more of your cash from another part of your operations into that business to help it keep going for a while. And then you gotta figure out what your problem is. Is your sales pipeline bad? Did you buy too much inventory? Do you have too many expenses?

And you're back into kind of managing your, your p and l.

Karthik Chidambaram: And the role of A CFO. Right. It's kind of very blended, even with I would say CIOI think, you know, at Duncan panel, what we've done is a great example, right? Right. So when we were chatting, you were telling that, hey, I mean I do a lot of technology investments, right?

Right. And because of the investments you did,

Pete Chrobak: right,

Karthik Chidambaram: it's kind of helped increase revenue quite a bit. Right? So can you talk about that? Right. So how do you look at technology investments?

Pete Chrobak: Yeah. So, you know, four and a half years ago when I got to Duncan Parnell. You know, the owner, our president and I were talking about growing the business through acquisitions and gen, also organic growth.

So the big thing is, is you know, you don't wanna have to add a lot of people to your corporate team or your back office staff, right? Accounting, hr, those roles. You want those to kind of scale reasonably with the business. So what I decided to do then was put a kind of group of people together, which I called our technology team.

There's probably about six of us in the room, and they're all from different areas of the business, right? Accounting, you know, operations, purchasing. And he said, Hey, let's talk about like what type of technology we should have in the business. And as we were talking about it, you know, some different ideas came up.

And we decided to put like an AR automation solution in place, right? So where customers can go online and pay their bills at the same time, collection notices are automatically generated to them by email or you know, a list of phone calls for our people to make. And that probably saved 30% of our AR team's time, right?

So now we could pivot them to do something else on the back office team. Or as we were growing, they could take on some additional tasks in business. Same with like ap, you put in AP automation, you don't have to add another headcount to the team. Because they can just manage that process. But I've also learned my lesson.

You put in technology and you automate a bad process, it just makes things worse. So you have to really be mindful of your scope of what those technology projects are so they don't cause more headaches. At the end of the day.

Karthik Chidambaram: And for AR automation, you're using Unified ar,

Pete Chrobak: right? Yeah, unified AR is our product for automating collections and has our online payments, and then we also use.

Wells Fargo's integrated receivables option. Mm-hmm. Which is a check comes into the bank or an aach h comes into the bank account and it will use some AI to match up the payments to the receivables aging. So between those two, we have a fully automated AR solution.

Karthik Chidambaram: Dan Hatcher is a good friend, so Yeah.

I'm glad you're using Oh no, Dan's

Pete Chrobak: awesome. It's one of the best things that we put in place was unified ar

Karthik Chidambaram: You talked about ai, right? So, I mean, how are you seeing that? Are you leveraging that? Quite a bit and you know, as the CFO.

Pete Chrobak: Yep.

Karthik Chidambaram: How do you see that panning out?

Pete Chrobak: So, AI's a little scary, right? Mm-hmm.

Because like, you know, you can put information on all these different websites like chat, GPT, and other places where that information may not be secure. Mm-hmm. So that's my probably number one concern is like. What are our people using and how do we put rules around that At the same time, you know, you look at what Epicor ISS doing and they're building AI into their ERP systems, which is that Prism program.

And then you have Salesforce with, I think it's called Einstein now, or they might have changed the name. Mm-hmm. And it's like, which one do we use? Mm-hmm. There's just so much AI out there right now. It's hard to figure out where we need to be and where we're gonna get the most bang for our buck. So we've, we're probably a little slower than I'd like to be on adopting some of the ai.

You because we're waiting to see what some of our partners do like of software companies that we're already using.

Karthik Chidambaram: That makes sense. Right. Especially with finance, you know? Mm-hmm. The finance data, it's critical.

Pete Chrobak: Yep.

Karthik Chidambaram: And you, you don't want all of that lying everywhere. Yeah.

Pete Chrobak: Right? Yep. Yeah. No, that's the scariest thing.

Somebody puts something out there and it goes out into the web and, and who knows who's gonna see it, or if it gets out through a hack or something.

Karthik Chidambaram: I'm just curious. Right. So for technology, right. So there are a lot of jobs out there and mm-hmm. Tools like copilot helps you. Be a better coder, right? But when it comes to finance, right?

So how is the job market, right? Because obviously you need a lot of, maybe, you know, you definitely need more people in technology or in distribution than in finance, right? So let's say if somebody is just graduating from college

Pete Chrobak: Yep.

Karthik Chidambaram: Majoring in finance.

Pete Chrobak: Yep.

Karthik Chidambaram: What advice would you give them?

Pete Chrobak: Yeah, so like for finance and accounting majors is who we run into a lot when we're hiring for our accounting team or our purchasing team or some of these other areas.

I think the biggest benefit for them would be trying to embrace a lot of the technology. Mm-hmm. Like looking at like what copilot and Microsoft programs can do to help or looking at other data tools, power bi, learning how to use that. The more you understand, you know, not just the accounting or finance side of the house, but also how the software program can kind of leverage the data that you have.

I think the more successful they can be right out of the gate.

Karthik Chidambaram: Absolutely right. So essentially, right, so for finance, tech is very, it's the key, right? Mm-hmm. So you can't just say, you know, I'm just doing finance. No, but I don't know tech, you know, that doesn't work.

Pete Chrobak: Yeah. They're very blended, right? Like when I was in college, it's like 20 some years ago now, there was what was it?

Management information systems was like one of the majors, right? And I think that's kind of gone away now, but like accounting and that have merged and it's really accounting information systems. And you really have to understand, I don't wanna say a lot of code, but you gotta understand enough to be dangerous.

Right.

Karthik Chidambaram: Well, a lot of people ask you financial advice, Hey, I have a hundred thousand dollars. What do I, and I

Pete Chrobak: tell 'em, I'm not an investment person. Right. Because like, you know, my background has always been the taxes, the bookkeeping, the accounting, and the mm-hmm. The controllership. But like, now as I've evolved, you know, they do ask questions about, you know, operational things or strategic thinking.

Karthik Chidambaram: So, but what would you advise, right? Let's say I have a hundred thousand dollars and I wanna invest and I wanna grow. What would your advice?

Pete Chrobak: Oh man, that's tough. Right now. I don't know. I'd, I'd probably say depends on what your personal interests are. Mm-hmm. Right. A lot of people are probably risk averse, but like, if it was me, I'd probably look as, you know, if, do you like your job or not?

Is there something you're really good at? I'd probably invest in opening my own business or tell you to do your own business. Yeah.

Karthik Chidambaram: That's awesome, man. That's great advice. I know you read a lot and you read a lot of leadership books, right? Mm-hmm. So can you recommend a couple of books?

Pete Chrobak: Rumsfeld Rules I think is one of my favorite books that I've read.

And then the other one I really like is First Break All the Rules. Yeah. And that one kind of reinforced a belief I had. So I'm very much a people person and I love interacting with people on my team and, and I like seeing what people are good at. And at the same time, you have people that work for you in your organization that may not be in the right seat on the bus.

So you're not trying to fix what, maybe a weakness of somebody, but you really wanna put 'em in a position of strength so they can be successful. And that's one of the main takeaways I took from that was. You know, it was helping me like, yes, it is okay to move somebody from one seat to the other if they can be more successful for themselves in the business.

Karthik Chidambaram: No, absolutely. I think that's very critical. Right. So essentially, I'm just trying to understand, right, so you read and you read, you like something you read. Mm-hmm. Then you try to put it to work. Is that how we do it?

Pete Chrobak: Yeah. Well and sometimes it's just reinforcing like what I already thought, right? Sure.

So I like to read to reinforce some of my beliefs, but at the same time, if I can pick up, you know, one or two tidbits, you know, it helps me along the way.

Karthik Chidambaram: And the theme of this podcast is driven.

Pete Chrobak: Yep. So

Karthik Chidambaram: how are you driven?

Pete Chrobak: I just like to help people. I, you know, every day, you know, I, I just interviewed a person this morning for our HR team and I said to her, what would you say if I said, I love Mondays?

And she like, looked at me and she's like, I love Mondays. Like it's a fresh start, like the beginning of the week. And I'm like, I love it. 'cause if all the people that I get to interact with and work with, and if I can help somebody develop in their career, you know, that's probably one of the biggest motivators for me.

Karthik Chidambaram: So, Pete, I really enjoyed this conversation. Thank you so much for your time. Thanks for being a part of the Driven podcast. Thank you.

Pete Chrobak: Yeah, I appreciate it, Karthik.

Karthik Chidambaram: Thanks.