Beyond Benchmarks

Treasury is far more than a processing center, as companies that can measure its true value are learning.

But some CFOs still want to see how they stack up against their peers, so they can say that their treasury group affords them a competitive advantage. For that they need comparison data from within and outside their industry. That’s when surveys from associations and professional groups can still come in handy. When annual budgeting time rolls around, FMC’s Schumann, for example, still finds treasury head count per revenue dollar a useful metric.

Sharma tracks how Zurich Financial measures against its own historical standards for treasury, but he also likes to compare the insurer with its peers. “I want to be best in class,” he says.

Vincent Ryan is senior editor for capital markets at CFO.

 

 

Cash: The Holy Grail

Treasury departments’ performance runs the gamut, but even the best rarely excel at forecasting cash flows. Yet the volatility in the global economy, and banks’ continuing hesitation to lend to some companies, has made liquidity a top priority. In addition, as long-term interest rates rise and companies migrate out on the yield curve or invest cash in fixed assets, the danger of being surprised by cash needs increases. “More companies need to do detailed cash forecasting, but most just talk about it,” says Paul LaRock, a principal at consulting firm Treasury Strategies.

To effectively forecast cash, however, finance needs to gauge how expertly treasury can get at the inputs it needs to do the analysis. Cash visibility is one common stumbling block, says Dub Newman, head of global treasury sales at Bank of America. “Am I getting a day or two delay when I try to roll up accounts and see my cash position, or is this a real-time event?” asks Newman. Even companies that have solved that issue domestically often have pain points with cash overseas. Treasurers that have to poll local country managers every morning or evening to obtain a global cash view are at a disadvantage.

Every aggregate cash-position number has to be taken with a grain of salt, however, says Paul Higdon, chief technology officer at IT2, a treasury management software and service firm. “It’s the cash you don’t know about that’s the problem,” he says. Companies with tens or hundreds of bank accounts that don’t reconcile every account on a daily basis, usually for cost reasons, have to be particularly careful.

And CFOs can’t forget about the speed of money as it winds through the treasury department, says Dyfan Williams, a managing director at Fundtech, a payment systems provider to banks. Corporate disbursements are still very paper-based, he says, and paper-based systems slow down the process of generating liquidity. — V.R.

How CFOs get treasury data from their regional offices/headquarters

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