Treasurers’ Evolving Role in Managing Cash Flow Performance

By Kyriba October 19, 2015

Predicting the future is not a new corporate strategy. CEOs and CFOs have, for decades, felt the pressure from their boards and investors to provide guidance on future results, whether it be revenue, EBITDA, new product launches or geographical expansion. Additionally, these pressures do not end with the delivery of the forecast, as investors demand executive management deliver against their guidance. So what does this mean for treasurers? If one were to browse any treasury or cash management publication in the past 10 years, they would undoubtedly find dozens, if not hundreds of articles evangelizing the advancing role of the corporate treasurer.

Firms, including my own, have honed in on this trend to address the growing needs of treasurers, and have partnered with these corporate finance executives with new strategic solutions to support their advancing role – and have been very successful along the way. So why is this? One of the main reasons is treasurers now find themselves feeling the same pressures from their board, CEO and CFO to also provide investor guidance – and execute against this guidance.

While the traditional credo of treasurers is to protect the financial assets of their respective corporations, including prudent investment and currency risk management, and managing operational liquidity risk through effective financing and cash operations, treasurers are now tasked with taking a leading roll with their colleagues in financial planning and analysis (FP&A) to provide free cash flow forecast guidance to their board and investor community. The reasons for this progression are many, but perhaps the most prevalent is the fact treasurers have access to a unique set of data that equips them to be the most effective in managing cash flow expectations.

By having the first insight to global bank balance and transaction activity, treasurers have the distinctive perspective of analyzing their company’s global cash flow performance in near real-time; ahead of the corporate accounting team or any other corporate finance organization. The challenge historically for the freasurer was how to consolidate daily or weekly bank activity, categorize this activity, and compare against a pre-committed forecast.

Today, with the evolution of truly bank integrated treasury technology, corporate access to bank reporting protocols including SWIFT, and a convergence of bank formats, this barrier has quickly diminished. Efficient transparency to global bank reported activity is the foundation in the treasurer’s ability monitor, analyze and provide guidance to C-Level management against previously communicated cash flow guidance. But what about the inception of the cash flow forecast, what are the expectations of treasurers today in this process?

Convergence of the FP&A budget plan and treasury direct cash flow forecast

Providing inputs to the cash budget or strategic cash flow plan is nothing new for the treasurer. Treasurers have owned specific forecast line items as such as interest income and interest expense for years. What has changed however is the treasurer’s involvement in the broader cash budget process. For larger organizations, there is no dispute the cash budget process is almost always owned by the FP&A department. As part of FP&A planning process that includes construction of the P&L and balance sheet forecasts from business unit plans and geographical considerations, the responsibility of extracting an indirect cash flow statement forecast similarly resides with FP&A.

What has evolved however is the partner role treasury is playing with FP&A when constructing the cash flow statement. Perhaps the most strategic benefit the treasurer contributes to this process is improving the specific timing accuracy of when cash flows are to be realized. FP&A traditionally takes a higher level approach when it comes to the cash flow forecast, by starting with for net income and adding back changes in balance sheet accrual accounts to construct an operating or free cash flow forecast.

Treasurers require greater precision when it comes to cash flow forecasting, primarily to ensure global funding requirements across global business units are fulfilled and operations continue to run smoothly. In addition, treasurers must execute capital allocation strategies, whether they be share repurchase programs, dividend payouts and M&A activities, for which accurate and timely cash flow forecasting is a prerequisite. As a result, the treasurer will often conduct his or her own liquidity forecast, which involves set of answers to strategic questions outlined my previous piece “Six Questions Every Treasurer Should Ask about Their Cash Forecast Process.”

This exercise and the resulting cash flow precision, promotes the treasurer as the business partner to not only help validate the FP&A forecast, but provide greater insight to the timing of activity in the cash flow budget. For example, the treasurer’s historic insight to global collection trends, disbursement behavior and timing of payroll activity at a global scale, serves as an invaluable resource to FP&A and other corporate controller teams when completing the cash budget process.

Align the direct to indirect forecast – and taking action

In many companies, the treasurer’s value extends to synchronize the FP&A indirect forecast to the treasury’s direct method. Although the line items differ within both methods, the ultimate objective of predicting change in cash flow remains. By utilizing their direct method and updating the forecast either daily or weekly as bank actuals are reported across their global banking group, treasurers can provide valuable strategic guidance to the CFO on free cash flow upside opportunities, as well as downside risk, to the previously board and investor committed FP&A indirect cash flow plan.

It is on this principle that treasurers now find themselves on the forefront of monitoring the performance of operating cash flow, which is becoming a greater financial metric for C-level and boards across the globe as outline in the recent WSJ article “SEC Eyes Broadened ‘Clawback’ Restrictions.”1

Equipped with this real-time insight to cash flow performance, treasurers are now empowered to take proactive action to help ensure cash flow targets are achieved, without waiting for the month-end accounting roll up of the balance sheet to understand where they stand. These cash flow actions may include cross functional collaboration with AR teams on collection strategies, collaborating with AP on payment policies, and championing working capital solutions such as supply chain finance and receivable financing reduce the cash conversation cycle and improve free cash flow.


In summary, it has never been easier for treasurers to have a real-time pulse on their global businesses thanks to the advancement in global bank networks, convergence of bank formats and integrated TMS solutions that eliminate the need of drawn-out IT projects and multiple vendor integration challenges.

With this insight come greater demands from CFOs, CEOs and boards, but equally a tremendous opportunity for treasurers to add business value to their organizations by:

  • Improving board, C-level and investor confidence. As operating cash flow forecast guidance becomes more prevalent on board presentations and CFO quarterly investor earnings calls, so too does the heightened pressure on treasurers to deliver results.
  • As the stewards of all things cash, treasurers are in the unique position to identify cash flow trends across their organization, and leverage this analysis to enhance the accuracy of the strategic cash flow plan in collaboration with FP&A.
  • The treasurer’s fiduciary responsibility to flawlessly execute the capital allocation strategy requires prudent intercompany cash flow management to ensure global cash flow is mobilized to HQ or regional centers to meet cash flow demands, while ensuring external borrowing costs are minimized.

Further reading

Ebook: Six Questions Every Treasurer Should Ask about Their Cash Forecasting Process

Ebook: Perfecting the Cash Forecast: Adding Business Value to the Organization

Blog: Four Ways Inaccurate Cash Forecasting can Hurt you


1SEC Eyes Broadened ‘Clawback’ Restrictions – Wall Street Journal, June 2, 2015

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