In volatile and uncertain times, organizations look to treasury departments to guide them. Treasury is well-suited for this role because it touches all areas of the company. But as AFP’s latest Treasury in Practice Guide points out, treasury must first establish trust to be seen in this light.

“You want to have that seat at the table when those strategic decisions are being made, and if you don't have that trust, you most likely won't be invited to the table to make those decisions,” said Bruno Fernandes, deputy CFO and treasurer for the Government of Washington, D.C.

Good communication is often the key to building trust. The more that treasury and the finance chief are on the same page, the better that relationship will be. “You have to make sure that you have alignment between treasury and the CFO,” said Bob Stark, vice president of strategy for Kyriba. “They need to know what to expect from you and you obviously know what to expect from them.”

A good leader in treasury also needs the trust of his or her team.  Niklas Bergentoft, treasury leader for Deloitte, stressed that having a good team around you in treasury can often be the key to success. He advises treasurers and treasury managers to find their ‘‘wing woman” or “wing man” on the team that can help them get the things done that they need to get done. And it’s important to cultivate that relationship to make sure you have that support, just like the relationship and support of executive stakeholders are critical to mission success.

Dana Laidhold, treasurer for Peloton, added that trust and transparency are essential for treasury to contribute strategically across the organization. “You need to understand what's going on in the business so that you can bring that back, and bake it into your forecast and your process,” she said. “There’s a trust that has to come on both sides. Not every business case is crystal clear; a lot of judgment has to go into decision-making, so trust is the foundation to get things agreed upon.”

ESTABLISHING YOURSELF

An essential way to obtain trust from the CFO and across the organization is simply to doing your job well. In treasury, that’s often a bit more complicated than in sounds because treasury departments tend to be small and cross-functional. But amid that often-chaotic environment, treasury also needs to be consistent with its core deliverables.

For enterprise software company Infor, the key driver is managing cash and liquidity, explained Susan Lee, vice president of treasury. “Our cash is seasonal. Every fiscal year, we go through a short period where liquidity is thin. It is critical for treasury to understand working capital by entity and repatriate funds efficiently,” she said. “The CFO relies on treasury to get through that seasonality without having to borrow from the revolver.”

Deloitte’s Bergentoft has observed treasury functions branching out more and focusing on business growth, looking at transactions from the due diligence stage through post-transaction synergy realization. He noted that many treasury departments are partnering with finance on working capital improvements and reduced cost of finance infrastructure through advising the organization on opportunities like payment hubs and payment modernization. “If you are able to free up hundreds of millions of dollars, that has a lot of value for your organization,” he said. 

When Fernandes first moved from the private sector to the public sector, he focused heavily on working capital, as there was a common goal of streamlining the organization. “We spent a lot of time focusing on liquidity and working capital so that we could be nimble with our investments, as well as our debt issuances,” he said. “That actually saved us millions of dollars in debt service. So the fact that we focused on some of these areas, helped us gain that trust of the CFO.”

FINDING OPPORTUNITIES

Often when a company is in transition, treasury has an opportunity to distinguish itself and be seen as a relevant group that brings new insights to the table. About a decade ago, Infor transitioned from offering traditional, on-premise software to its customers to delivering a cloud-based subscription model. At the time, treasury knew the shift would have a material impact on its cash trends. “Being able to capture that impact, understand it, tweak and redesign our forecasting models, has enabled us to highlight the new, emerging trends,” Lee said.

When Laidhold joined Peloton about a year and a half ago, the company was in the midst of its transformation from a small fitness technology company to a global phenomenon. Prior to her hire, there wasn’t a treasury department and she applied what she calls a “treasury in a box” approach to every area of the organization.

“We had just launched in our first non-U.S. markets, so we had to build and develop FX policies,” she said. “We had to think about how we wanted to approach hedging. Additionally, we had just completed a capital raise and we're planning to head into an IPO, so cash investing was, for the first time, very relevant and important.”

Laidhold added that the CFO was relying on her to provide expertise on how to craft treasury policies and procedures. She was able to articulate, from her years of experience, what the company needed. A cornerstone to success was working with a CFO, who was willing to give her enough autonomy to take some risks and try new things in order to build out a modern, robust treasury function.

Stark noted that having that leeway can go a long way towards helping treasury become involved in strategy. “You have to do the job extremely well, but if you have a little bit more latitude, you can further prove how strategic treasury can be,” he said.

For more insights, download AFP’s latest Treasury in Practice Guide, Treasury as a Strategic Ally to the Business, underwritten by Kyriba.