The challenges facing treasurers in a period of high uncertainty

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The challenges facing treasurers in a period of high uncertainty

The issues and challenges facing treasurers in a period of high uncertainty

As we enter a period marked by a global recession in economic activity whose extent and consequences cannot yet be fully understood, companies are more than ever being forced to reckon with the problem of managing uncertainty. As during the 2008 crisis, treasurers’ specific role is again in the spotlight, and they are likely to see some permanent changes in their status.

Deploying effective measures

In periods of high uncertainty, one of the most worrisome potential consequences is a lack of liquidity. In this context, treasurers are seeing their role evolve towards that of full-fledged financial strategists, with their connections to finance departments becoming much stronger as a result. This phenomenon is especially prevalent in businesses with revenue of over 80 million euros per year, which typically have substantial cash flows. The treasurer then becomes a tactician with a predominant role in risk management, providing forecasts that are essential to establishing an overall strategy.

1.Financial visibility and the forecast plan

No matter how large or small a business may be, a clear view of both internal and external financing will be more vital than ever in the weeks and months ahead. Flawless planning is needed for short, medium and long-term financing alike.

In circumstances like these, it’s more essential than ever to establish a solid forecast plan that includes multiple scenarios. This forecast plan must be easily adaptable for the very short term. It must also include a rolling 12-month budget structure.

2. Monitoring indicators: a key issue for treasurers

To achieve this objective, treasurers need to rely on the most robust indicators available. They monitor operating cash flow in order to keep a constant eye on self-financing capacity (SFC). They also track working capital requirements (WCR), which treasurers can try to reduce via supplier payment schedules and client reminders.

Finally, let’s not forget one other indispensable indicator: EBITDA. It positions the company in relation to its competitors, and allows for a distinction between “direct” and “indirect” forecasting methods.

A reliable view of the company’s financial situation, access to various key data, and continuously updated source information are all core issues for any treasurer

A period of risk (and opportunity!) for treasurers

1.Decompartmentalising services

Because the financial risks inherent in periods of uncertainty are difficult to manage, treasurers shouldn’t be working alone. It’s a good opportunity to communicate with operational teams and establish joint projects with the finance department. This collaboration should lead to a decompartmentalisation process that breaks down walls between services to establish a single cross-cutting structure.

The treasurer will then have access to both accounting and budget data, and can refine their forecasts (Direct CFS and Indirect CFS) accordingly.

2. Managing risks: treasurers must be doubly vigilant

With more reliable and consistent data, treasurers can have a precise understanding of their position with regard to various market risks, including exchange rate, interest rate, and raw materials risks. 

Unfortunately, times of crisis are also associated with a general increase in fraud. In France, the most striking example of this pattern was the recent scam that cost a Rouen-based pharmaceutical wholesaler some 6.6 million euros when it attempted to buy hand sanitizer gel from what turned out to be a fake supplier. Rushed actions and reduced vigilance in periods of uncertainty are a treasurer’s worst enemy, since they are on the front lines when it comes to protecting their company’s liquidity flows.  

As anxiety-inducing as this period surely is, it can also be a good opportunity to question certain existing methods and develop a more effective and accurate approach to cash management.  

In this period of crisis, then, the issues faced by treasurers go far beyond mere cash management. The treasurer becomes the leading defender of their company’s financial stability — a big task that’s now essential to overcoming the current crisis!

Treasurers, we’re here to help you with the challenges you face! 

  • Looking to manage your cash with a clear, fine-grained view of your situation?
  • Decide on financing?
  • Limit your risks?
  • Track the “right” KPIs as closely as possible?

Exceptional offer: ACA is making its CashSolve solution available free of charge until 30/06/2020 to help companies get through this period of uncertainty

Send your request to marketing@aca.fr

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