One treasurer’s rocky quest to shift his company’s focus from P&L to cash.
When one NeuGroup member saw an opportunity to elevate treasury’s role within the company while focusing its overall view of cash, he took it—but the journey was no walk in the park.
- He encountered some resistance from leadership and the FP&A team, but was able to work with them to reconcile two methods for cash flow forecasting and take a more active approach to cash management.
- The member, the treasurer at a high-growth tech firm, addressed how to overcome these internal obstacles, which he said are common to treasurers working to build a cash culture and move away from a P&L focus.
Destroying the ivory tower. The member said treasury tends to land in a unique kind of corporate silo that he called an “ivory tower;” not only separate from the rest of the company, but seemingly elevated above it.
- For him, this led to tension with other divisions even before he embarked on his cash mission. “It is a big issue when treasury is not connected to the company’s [operations], management and the board,” he said.
- “When treasury is only focusing on operational matters, like cash positioning, it is not ideal,” the treasurer said. He felt treasury was performing very well on the day-to-day operations side but was restricted by not being involved in the long-term cash or capital structure planning.
- “In our case, we also had a high debt leverage, so we needed to have full control of the company’s cash model,” he said. “FP&A was in charge of that but wasn’t really doing it. So we had to transform the company’s culture.”
Hard work pays off. When the treasurer was first brought in to help manage strategic cash planning (also known as the indirect model for long-term cash forecasting), he said FP&A was hesitant to let go. Being able to strategically manage these relationships was key to the project’s success, he said.
- To soothe relationships, treasury now shares the responsibility, working alongside the FP&A team. “We work with external functions on a weekly basis, we have weekly reviews with teams and corrective action items, but we do not manage these functions,” he said.
- Now, treasury is part of the company’s process for strategic cash planning three years out, as well as the short-term forecast, which he said allows for better alignment between the two types of forecasting and a more holistic cash framework.
Internal discord. When another member said her CFO had expressed concern about a disconnect between the long-term cash flow forecasting and treasury’s short-term forecast, she similarly suggested allowing treasury to assist with both forecasts to bring them into harmony. It didn’t go over well, so she looked to her peers on how to overcome this resistance.
- The member who successfully completed this transformation suggested his approach to these situations: using a “treasury road map” to illustrate his vision to leadership. It breaks down, area-by-area, the approach the company took two years ago, how it is performing now and a vision for the next two years.
- “Just being able to have these conversations is good,” though they’re not always easy, he said. “I think, and this is key for me, if you’re transparent and have a regular review of projects, then that works.”
