It's not often you get to help chart the growth of a company that operates in a business category that's so new the shrink wrap hasn't been entirely removed yet.
DailyPay is among a small group of startups that think employees will be happier and more productive if they can access their pay when they need it rather than when the pay period ends. Earnin, FlexWage and PayActiv are some of the other companies in the space.
"Over three-quarters of the country has an aspect of paycheck-to-paycheck living," says Scot Parnell, CFO of DailyPay.
Under DailyPay's business model, cash-strapped employees who are up against the due-date for, say, their phone bill, but still have another week to go before payday, can avoid a late penalty by tapping an app on their phone to subtract what they need from their upcoming paycheck.
"On payday, the company does their normal pay cycle, the employer receives the outstanding balance of the paycheck, and we're reimbursed for the dollars we made through advances," Parnell said this week in a CFO Thought Leader podcast. "It's really a triple win. As a CFO, I really appreciate DailyPay's value to employees' companies, the employees get access to the pay they need, and it helps them avoid things like late fees, overdraft fees."
Parnell said banks charged more than $10 billion in overdraft fees last year, so giving employees access to their pay early can help ease a big problem. What's more, he said, it can boost employee productivity.
"A lot of time employees might even miss a shift or two because they don't have money to get to work," he said. "So, they're more able to show up and stay around longer. They're more engaged, which means the company wins, because we all know engaged employees are more productive. And turnover is very expensive. Lastly, the CFO gains, because we're lowering their staff costs and at no increase in SG&A [selling, general and administrative expenses] or acceleration of cash outflow to the company. The CFO's benefiting while they're using our balance sheet."
Financial services experience
Parnell joined DailyPay at the end of December after holding finance leadership roles in some of the country's most storied financial institutions, including CitiBank, MetLife and TIAA.
"I was in a place in my life where I could take some risks and I also think I've got some runway here," he said. "For me, it's too important to be absolutely excited about going to work every day. It makes me a better leader, and as I sat back and figured what I want to do next, this just felt more exciting."
Because both the business segment and the company are new (DailyPay launched in 2015), Parnell's challenge will be to ensure the company has money to grow without impairing its balance sheet; as a lender, it needs a strong balance sheet to advance money affordably.
"We have to pay attention to losses and liquidity, so there's work to do there to make sure we're able to manage that as best as possible," he said.
There are several other priorities he's set for himself. One is to sustain and enhance what he calls the company's fuel lines for scaling. "We're new and on-demand pay is new, so we need to make sure we're fueling the sales, the platform, and building the brand," he said. "It's really important I get funding for that."
Another priority is to build finance and administration excellence so he can lead his team to what he dubs finance nirvana. "Because we're small, I also have HR and legal, and so there are a lot of systems, processes and talent I need to be thinking through developing," he said. "I was delighted, when I got here, that there was a lot of capability and a lot of enthusiasms in the team, but it's a young group."
Getting to finance nirvana also means building a profit-and-loss (P&L) culture. "I don't want to have a situation where everyone is so top-line focused that they don't keep a balance on where the best growth is," he said. "At the same time, I don't want anybody worried so much about expenses that we're not making the investments we need to. So, finding that right P&L culture is really important."
And then there's his goal to leverage the data the company is generating. "Analytics, analytics, analytics," he said. "We have to build the analytical capability to take advantage of all the information we have at our disposal and put it to good use. There is almost limitless appetite for further insight."
Although he spent most of his career at established companies, he brings an entrepreneurial mindset to the job, he says, and he's familiar with the risk-taking culture of new business ventures.
"I've always had a hand in entrepreneurial activities," he said. "I've been helping friends start companies for a while. I've always wanted to do something where I could build from almost the beginning a culture, a team, a process, a finance shop and help define a market."
Getting his teams at DailyPay to where he wants them will involve a two-pronged approach, he said. The first is technical: building the teams' processes and systems, and the second is cultural: evolving the thinking of the team members, and that starts with him and what he views as adaptive leadership.
"Everything a CFO or other C-suite leader does has huge symbolic fallout," he said. "It gets analyzed. People look at it. They look for incongruence. It took me a while to tap into this, understand it and actually leverage it and moderate any downside. Even something like how the CFO does his or her travel and expense [reports] or makes capital investments in their own group can become stories that are told through the rest of the organization and be reinforcing either a positive or a negative culture. So, I'm very careful about that."