FP&ATreasury Management

Bridging the Gap Between Treasury and FP&A 

By December 1, 2021No Comments

By Nilly Essaides

Technological advances are fueling the convergence of once-disparate finance processes, as they increasingly rely on the same tools to execute critical processes.

In addition, faced with continued disruption in business, economic and financial conditions, CFOs expect finance organizations to contribute greater value through faster and more insightful decision-support. To do so effectively, legacy silos among different areas of finance must be dismantled.

Going Beyond Best Practice to Process Innovation

Nowhere is the need to bridge barriers more urgent than at the treasury and FP&A nexus, as both are charged with aligning the company’s strategic and financial objectives. The connection between the two is critical, if companies are going to make smart capital-allocation choices based on scenario planning, produce reliable forecasts of cash and P&L and deliver data-driven insight.

While the initial transformation will take some heavy lifting, it’s imperative the two groups understand their respective processes, identify redundancies, operationalize a collaborative relationship, and join forces to improve the quality of the decision support they provide key stakeholders. In the finance org of the future, intra-process best practices are no longer enough to achieve a competitive advantage. Today, finance orgs must reach beyond through process and technology innovation.

Five Points of Intersection

While treasury and FP&A teams represent different workstreams, they have several intersection points that should be recognized and operationalized.

  1. Data Analytics: Ideally both teams will leverage the same analytics solution, which will pull data from a single repository. For a while, each had its own technology ecosystem; however, larger vendors like SAP, Oracle, OneStream and Workday are pivoting away from a single-process focus to a cross-process view, thus reducing friction within finance, lowering system cost to bolster ROI, and aligning everyone on common methodologies, models and tools. Inconsistent data and models trigger confusion and undermine the goal of making data-driven decisions.
  2. Talent management: Research shows finance hires primarily from within, and it’s increasingly reliant on experiential vs. formal training. That means functional rotations, mentoring and coaching and career pathing are becoming critical to hiring, retention and succession planning—especially in today’s tight labor market. To attract candidates, finance needs to not only build brand awareness but also establish finance-specific talent development programs that offer clear career pathing. And while some treasury and FP&A skills are still specialized, core competencies are largely the same, e.g., financial and business acumen, critical and innovative thinking, agility and customer-centricity.
  3. Cash forecasting: FP&A and treasury produce short-, medium- and long-term cash forecasts that are often out of sync, creating confusion at planning time. By converging the two work streams, treasury and FP&A can leverage the same data-collection pipeline, models and intelligent automation to produce a more reliable range (vs. point) forecasts along with confidence intervals. This way, the end product can better support management decisions about capital raising and allocation.
  4. ESG: ESG will impact all areas of finance, primarily account-to-report (disclosures), treasury (financing) and FP&A (strategic planning, capital allocation, scenario planning and KPIs). FP&A needs to track the company’s progress toward its sustainability goals so they can be clearly communicated to multiple stakeholders, from creditors, to vendors, credit agencies, investors and auditors. Meanwhile, treasury is responsible for green funding and investment.
  5. Business partnering. Leading treasury and FP&A teams are investing greater resources in developing robust partnering capabilities. They are evolving their business acumen, dedicating FTEs, and refining engagement models to provide leadership with a clear view into the financial implications of business decisions, e.g., the impact on P&L, liquidity and financing requirements. The two have a shared interest in becoming a formal part of the business review process and developing common skill set.

The lines that separate different finance processes are blurring, as the finance operating model transitions to a new level of interconnectivity. That applies to FP&A and treasury. Another big area where we see convergence is between FP&A and account-to-report. The big question is what the finance org looks like, once everyone moves in sync.


Author dgarcia

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