Definition- What is Treasury?

What areas of responsibility typically fall under treasury?
- The most liquid parts of the balance sheet initially and over time, the entire balance sheet
- Cash management, investments, debt/leverage, working capital, bank relationship management, receipts/payments processing, credit & collections, foreign exchange, hedging (commodities and/or currencies), risk management / insurance, employee stock programs, investor relations
When should a company consider hiring dedicated treasury talent?
- Depends on complexity treasury responsibilities / needs (debt, foreign exchange, payments, receipts, etc)
- Companies typically look at hiring treasury talent when they reach revenues >$500 million and/or they expand internationally
What are the fundamentals of Treasury
- Cash Visibility and Reporting
- Cash forecasting and capital planning
  - Who are the players in your forecast who will put inputs into your forecast?
    - Receivables
    - Payables
    - Capital Planning, such as CapEx and financings
    - Distributions/dividends to shareholders based on their expectations for cash
    - Debt Providers, including their covenant requirements
  - How much detail do I need in my forecast?
    - Balance between time required to gather, validate and input the data with reconciliation and other needs for details
    - Best practice is to at a minimum define your main inflow and outflow buckets needed to align with company goals/reporting and forecast to that level
    - Also segregate by entity and/or region depending on how your company is organized
    - Identify and work with consistent providers of information
  - How to build a usable forecast?
    - Define and seek information on a set schedule (weekly, monthly, quarterly)
    - Identify forecasting participants and get their and their supervisor’s buy in, if possible include a metric in their annual employee review to their forecasting abilities
      - AP - Payments supervisor or delegate
      - AR - Credit and Collections supervisor or delegate
      - Payroll - HR supervisor or delegate
      - CapEx - FP&A/controller
      - Debt / Investments - treasury
      - Other - as needed
    - Communicate consistently and regularly with forecasting participants via email and/or other communication avenues within the forecasting tool you use
    - Build forecast using desired tool: Google Sheets, Excel (best when on a shared server), or a TMS
    - For Google Sheets and Excel:
      - Create templates for each forecasting participant with rows showing input and columns for dates (increments of daily, weekly, monthly or quarterly)
        Keep the templates separate and restrict access to the person responsible and the person compiling the forecast.
        Be mindful when building template’s structure that participants will likely be pulling information from ERP systems and from items on their desk and in their emails; build the templates accordingly.
        Place the templates on a shared drive and or email them out a few days/weeks before each cycle depending on what participants’ need.
      - Before kicking off a forecasting program, schedule training time with each person individually and walk through their input template and seek feedback on how to improve the template but be careful not to make it too flexible and thus unmanageable. Also clearly outline timing, level of detail needed, and ways for them to communicate any non-standard information (notes field on template, email, ect).
      - Run a test forecast process soliciting information via email or desired communication from each participant.
      - The consolidated report for each forecast cycle will typically be a unique workbook with a separate tab/sheet for:
        Consolidated report page (this is what gets published if you publish tabular information)
        Graphing and analytics (also gets published)
        Build trending graphs using key lines off the consolidated report. Include referential data like last year data for the same period on the graph.
        Each input template
        Historical information
      - When building the consolidated report page, reference key ROWS on the input templates and the historical data and/or run pivot reports off these sheets to the build consolidated report. Keep these ROWS consistent each forecasting period so you don’t have to modify your spreadsheets too much.
      - Run the first forecast and then repeat on desired schedule.
      - Continually update historical data into your forecasting spreadsheet and categorize it the way the categories are in your forecast.
      - Build an accuracy measuring tool to check your forecasts’ accuracy versus historical data on each increment in time (daily, weekly, monthly, quarterly) and by each input category (AP, AR, Payroll, etc). This will help you identify weak areas (time increments and/or categories) and increase accuracy over time. Run the accuracy measure ahead of each forecasting cycle and share with the forecasting team.
      - Make sure to date/time stamp each input template so you can inventory each forecasted period’s inputs just in case you have to go back to research anything - can be easily done in a field on the template and/or within the file name (i.e. YYMMDD - Forecast Payroll)
    - TMS systems do a lot of these things for you but some are costly and difficult to use. There are options that can meet most any budget however (happy to expand on how Treasury Suite and our competitors approach forecasting if we have time, but likely not).
    - What tools do you use?
      - I’ve used Excel extensively, most companies do. Google Sheets is great for sharing but not as powerful. I’ve also designed and used TMS forecasting tools. Their complex and oftentimes difficult for infrequent users of the tool.
  - What does a good cash forecast look like?
    - Consistent, repeatable, categories of cash flows that align with business / operating needs, simple graphing and tables (too much complexity people won’t use it), clear color and layout, name at the bottom so people know who’s responsible if they have questions.
How should we be thinking about Treasury by stage and what is the key indicator that you have moved to a different stage
- Startup - Focus on:
  - Cash visibility that at a minimum that shows all banks and all account balances on a daily basis, transaction detail is nice too
  - Include any debt (revolving, term, leasing) that shows outstanding, available, and repayment schedules (include in forecasting)
  - Efficient, effective and timely payments and receipts. Leverage electronic payments and receipts as much as possible (reduced fraud and cost typically).
  - Restrict access to cash/investment/debt information to only those that need it. Use tools at banks
- Mid - Focus on:
  - Cash visibility showing all banks and all account balances on a daily basis and include transaction detail as well
  - Include any investments (where located, balances, purchase/redemptions, accrued interest, etc) and compliance to investment policy and comparison to benchmarks
  - Include any debt (revolving, term, leasing) that shows outstanding, available, and repayment schedules (include in forecasting)
  - Efficient, effective and timely payments and receipts
  - Add additional monthly metrics / reporting such as:
    - DSO, DPO and CCC
    - Payments processed per person/time period
    - AR / AP aging reports and top 5 main focus customers/vendor for each
- Enterprise - Focus on:
  - ...