Seven Treasury Priorities in times of Covid-19

Date published: May 18, 2020

We are living in challenging times… Unless you are active in the business of food or household supplies, chances are that there is little or no new business. Existing clients may have trouble paying their invoices, while your suppliers will be chasing you to get theirs honored asap.

We are all convinced that at some point in time things will normalize and business will pick up again. Not everything will be as it used to be in the blink of an eye, but (again depending on which sector you are active in) your clients will come back and business will return to normal.

However, there is only one big catch. We need to be able to bridge the period between now and then. The only thing which will keep the company alive is cash, or when your Treasury becomes a treasure.

During normal times, treasurers and CFO’s also need to manage cash in a conservative way, make sure investments are safe, funding is secured, and that financial costs are under control. But now Treasury isn’t just another corporate function, it is THE function on which the mere existence of the firm relies. At NX Partners, we have identified 7 areas of activity which need focus now, and which can help you weather this perfect storm.

Cash Control Tower

Cash Forecast

Treasury should be aware of all expected cash in- and out-flows. In addition, Treasury should also be looking at scenario planning. All key business functions should have a direct line with Treasury and give input (quantitatively and qualitatively) which should allow the Treasury team to develop a forecast range which also includes potential unexpected flows.

Assess your Asset Quality

Are short-term investments shielded against extreme market and credit risk scenarios? Is their liquidity confirmed? Are the banks where you hold deposits still robust enough?

Quantify your Funding Capacity

What are your currently available financing options? Speak with your banker and review contracts to check whether some credit lines could have clauses in them which could allow the bank to withdraw any commitment. In any case, it pays off to speak with your main bankers on a regular basis and entertain an open and honest dialogue.

Analyze Outstanding Invoices and Upcoming Obligations of Major Clients

Analyze together with your sales teams your outstanding invoices and upcoming obligations of major clients towards you. This is where you need to be creative at times and think out of the box. Don’t forget that when we will all be open for business again, your clients are the biggest asset of your firm. Even if cash collection is very important, in some cases the answer could be to grant a client more time to pay his bills. If your sales department thinks that this could improve the relationship and lead to more future business, drawing on a credit line could be better than forcing a quick payment.

Keep Costs under control

Now more than ever is the moment to keep costs under control. Keep an eye on what you get charged on payments, FX and other transactions. This can be a good moment to check where you can save some money.

Ensure Treasury Contingency

Ensure the treasury contingency function. In cases where it is impossible to operate “normally”, one needs to have a solid contingency plan in place. This means that procedures should be in place to cope with key staff dropping out, physical locations being not accessible or IT-systems. This means that the Treasury function should be at the forefront within the company in terms of preparedness in the face of unexpected events.

Improve Fraud Policies

Improve policies against fraud. One noteworthy effect of the Covid-crisis is that it has lead to an increase in fraud attempts. Remote working has had a negative side effect in the sense that it makes companies more vulnerable to this type of risk. 

NX Partners would be happy to exchange thoughts on these priorities with you. No strings attached, just an open discussion. For as long as we are in lock-down, we will each have our own coffee at our desk at home. In a few weeks we could hopefully have that coffee together.