Cooling Off the Cash Burn

How William Goldstein, CFO of Integro, an insurance brokerage, helped the firm modify its great expectations.

What’s your cash flow like now?
Right now we’re cash-flow-flat. There are months in which we go negative and months in which we add to the cash balance. We still have $70 million in capital. We expect to end the year at $70 million. At the end of 2010, I would expect to be at $78 to $85 million in cash and capital. But the way we’re trending now, you know, we won’t have any decrease in capital balance this year.

Is free cash flow a guiding metric for your company?
We operate a little differently than companies that use traditional free cash flow. We manage things on an entity-by-entity level, and it’s hard to apply free cash flow to our world right now because certain offices produce higher cash flows than others, and there’s sort of a pooling approach. We’ve gone to a model where we have a strategic investment-grade portfolio that’s set for a 360-day duration. It’s very risk-averse, but it’s getting a nicer yield than we’d get out of a regular money-market fund. We don’t want to go longer. Given that we don’t know what’s happening with interest rates, we’re in a position where we can react quickly if there’s a period of inflation, an interest-rate increase, or whatnot. We manage the cash flow at a very local level right now, in which we’re looking at the timing of receivables, billings, and payroll, and sweeping everything else back.

Do you have an investment office?
I primarily handle our investments, along with an investment committee. We use Pimco to manage our portfolio and do all the trading operations. We outsource the investment-management function to them and we do the monthly conference calls and weekly reporting.

What’s it like to move from being an independent auditor for a company to being a senior finance executive of the same company?
I was at PricewaterhouseCoopers for just a little over 10 years. I did some work with Integro prior to joining the firm in 2005 and becoming the first controller here. I had developed a good rapport and a relationship with the people here, and I’ve always wanted to do something entrepreneurial. I learned a lot at PricewaterhouseCoopers, and I think a lot of what I’ve been able to do at Integro was built upon the foundation of public accounting. But to build something from scratch and see what your contributions are every day is a unique opportunity.

Was there a conflict-of-interest issue you had to deal with in making the move?
There was. When I joined, an audit had not been performed yet. Any of the work that I had done with PwC [for Integro] had to be reperformed. There were certain discussions at the audit committee about that. And there were the auditor-independence rules and notifications and the [Public Company Accounting Oversight Board] rules. But it was a seamless transition. It was actually an easy fit going from public accounting to a start-up because in public accounting you’re looking at or reviewing [financial results] and you’re trying to provide advice on how to fix something. When I joined, I had to look back to make sure that what we had done for ’05 made sense. I was essentially providing feedback to myself on how to build things. And I went from being the reviewer to the doer.




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