Guerilla Treasurer

Have you ever calculated how much money your company loses when you push back a development project?

Let me guess: the standard answer is something along the lines of having so many important development projects and only enough resources to undertake some of the projects. Does this sound familiar?

I actually use the exact same line when I cannot come up with any reasonable counter-argument to a salesperson who tries to sell some perfectly reasonable thing to me. But let me repeat the actual question:

From the Secret Guerilla Treasurer Academy

Do you know how much money the postponement of a project costs your company? If you haven’t calculated that, how do you actually prioritize your projects?

Even though treasury is a support function, it is still definitely part of the business. And in a business, all initiatives should be guided by their bottom line impact — no matter what the so-called company values statement says. Consequently, the treasury needs to calculate the value of every initiative and prioritize them on that basis.

During the past several years, I have come across many a company where cash forecasting is one of the most important development projects. Nevertheless, the project is postponed year after year, as some “more important” project demands the full attention of the treasury. Typically these “more important” projects are wide-ranging cash management overhauls, that are used as a pretext to RFP/I/Q indistinguishable cash pools or something similar. A usual trait for these projects is that the effort spent vs. the monetary benefit is not even in the same league as in a cash  forecasting development project.

The average corporate treasury development project goes something like this: the treasury gets allocated funds from the management to improve risk management and promptly decides to acquire a shiny, new Treasury

The State of Treasury Budgets

Management System (TMS).

The first six months goes by in a blur in the RFI/RFP/RFQ merry-go-around. When a decision finally gets made, the next three months are spent in the negotiating table with the chosen vendor wrangling about contract terms. The next eighteen months are then spent on a step-wise implementation of the system.

The whole project ties up the treasury’s development resources for several years and costs an arm and a leg.

Does the company get its money’s worth?

If the homework has been done properly and several basic things are in order, the answer is an emphatetic “maybe”. The project could have been much more productive, but that is a topic for another blog entry.

Quite often, however, this approach is simply barking up the wrong tree. If the basics are not in order, the investment into a new system is a waste of money and resources.

The key task of a treasury is to manage the financial risks — such as liquidity and currency risks — of the company. The risks are caused by the cash flows of the operative business. The treasury needs to have reliable, real-time cash forecasts and FX exposure reports. Otherwise the situation is GIGO (garbage in, garbage out) no matter how expensive and fancy the treasury systems as such are.

So what would a Guerilla Treasurer do? He would start by putting the basics in order.

The beauty of the whole thing is in the fact that the basics are relatively easy to put in order and it does not even have to cost very much — all the company needs to do is put its B2T (business-to-treasury) process in order. This, however, requires attention and willingness to look at things differently from the treasury.

The first prerequisite is that the operating units understand what is expected of them. This, in turn, requires the  treasury to understand the needs of the operating units and create instructions and policys in a language actual human beings can understand.

The second prerequisite is having appropriate tools; if the tools are built for the needs of the treasury only, there is a considerable risk that the operating unit people find them too hard to use.

In a true cliff hanger spirit, I will break here and save my step-by-step recipe for putting a company’s B2T process in order for the next several  installations of my blog.