How to Strengthen Treasury’s Role as a Business Enabler

By Erik Bratt June 14, 2018

Editor’s Note: For this installment of our multi-part blog series, profiling CFOs who are leveraging treasury to drive strategic change in their organizations, we focus on Douglas Bettinger, CFO of Lam Research, a leading chip manufacturer. Douglas talks about how his treasury team is a business enabler, especially in areas of cash generation, to help drive growth for the organization. His comments are from his profile in Kyriba’s new e-book, “The CFO Perspective: The Strategic Value of Treasury,” which profiles more than a dozen CFOs and high-profile management consultants from Accenture and KPMG. Enjoy!

“At the highest level,” explains Douglas Bettinger, executive vice president and chief financial officer of Lam Research, “treasury’s role is to optimize cash generation in a way that maximizes the value of the company.” In a large enterprise, executive leadership thinks a great deal about the balance sheet, while line-of-business managers focus more on profit and loss (P&L). “I plug my treasury people into areas of the business that need more attention on cash generation.” In this way, treasury can sensibly use the balance sheet in ways that enable new, profitable business activity.

Related reading: Why Free Cash Flow is Becoming the Go-To Measurement for Corporate Financial Health

There are many ways Bettinger’s treasury team contributes value to the company beyond routine block-and-tackle treasury functions:

  • As a global enterprise, it is important to hedge against currency fluctuations. This not only helps deliver on P&L but also delivers the cash flow that must come from different parts of the business. “We hedge different balance sheet exposures and revenue streams in different currencies,” Bettinger says. “Treasury is in a unique position to manage that.”
  • Nobody else in the company focuses on the currency-management piece.” Bettinger’s company creates hedge ladders, where they look out four, three, two, and one quarter, with different exposures hedged in each quarter. Another valuable treasury function involves taking advantage of the balance sheet to enable business that might not otherwise occur. For instance, it may be possible to set up a leasing arrangement for a customer that does not have access to capital it needs to purchase equipment. “We use our balance sheet in a prudent way to protect the asset and at the same time accrue new business,” explains Bettinger. “My treasury people are uniquely positioned to make those risk tradeoffs for the corporation.”
  • Managing the cash conversion cycle is another valuable treasury function that includes managing collections so that money comes in as quickly as possible while stretching out payables. Optimizing cash conversion is a balancing act that ties closely to inventory management, which involves setting targets and objectives for cash consuming inventory and making decisions about where to place that inventory. “How you balance the debt-to-equity ratio and optimize the capital structure of the balance sheet affects your ability to fund different activities in the business,” Bettinger says.

To read the rest of Douglas’ interview, plus get insight from nine other CFOs, download our new ebook.

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