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If Cash is King, what is the Queen?

We are in a new era of Treasury. Cash has always been king, but how can the modern Treasurer optimise their queen to influence the long- term sustainability of their business?

Schackbräde

By Georgina Rush, Head of Working Capital Solutions, Sweden

Those of us that were not working through the ‘08 financial crisis are often reminded about the chaos and uncertainty. However, the last few years have been an equally turbulent rollercoaster ride, the next watershed moment.

Covid 19 was an unprecedented challenge on many fronts; shock waves reverberated throughout the global economy and society quickly became accustomed to diminished interest rates. But just like clockwork, inflation & rates are back on the rise and the unavoidable topic of working capital is back in the headlines.

What has been fascinating to follow over the past few years is the development of the treasury function. Treasuries that were notorious for focusing on cash, financing, and payments, have evolved dramatically.

They have become gripped, and rightly so, with sustainability objectives, understanding value chains, digitalisation, and sales enhancements. They should receive more recognition for manoeuvring through the everchanging geopolitical landscapes, grappling with onshoring decisions and painstakingly dissecting global supply chains. They now go way beyond ‘just’ Treasury. This poses a huge opportunity.

To use a chess analogy, the new era Treasurer sits in a prime position to maximize their cash and working capital strategies. Cash is akin to the king on a chess board, the most important piece, demanding protection. Working capital, like the queen, is the most powerful, flexible, and strategic tool on the board. Just like the grandmasters of chess, Treasurers today are looking to deploy their king (cash) and queen (working capital) in tandem to influence and shape the long-term health and direction of the business.

How can the modern Treasurer optimise their queen?

1. Back to basics

It may feel old school but invest time in your cash conversion analysis, an important working capital metric. Do your days payables vary by division? Do your days sales vary by geography? What levels of inventory do you need to remain competitive? Importantly, where do you stand compared with your peers? As the cost of financing is now a major player in the P&L, this is one piece of the puzzle to dissect to maximise your cash flow & liquidity.

2. Cross-functional collaboration & governance

We often see scattered stakeholders across the business with conflicting priorities and reporting lines. Seek greater collaboration, ensure there is a cash awareness across departments and geographies to guarantee successful use of working capital tools. We have seen how effective it can be when sourcing, sales, finance, and sustainability teams act together, establishing a culture of working capital targets & incentives.

3. Efficiencies

Use working capital solutions as a way to enhance automation, access to real time data, improve accuracy and efficiencies, reducing costs long term. From monitoring of bad debts to compliance, working capital technology can contribute towards advancing digital efficiencies and sustained value in the business.

4. Driving ESG goals

Utilise your power of influence by applying working capital programmes to drive change in line with corporate values. This space is evolving across the full value chain. It is used as a powerful tool to reduce Scope 3 emissions in tandem with supply chain finance, or for example drive human rights & bio-diversity targets in line with wider corporate targets.

We can’t deny that progress takes time, and just like the name of chess, success lies in sustained efforts rather than short bursts. Be bold and strive to be a market leader, maximising your tool kit is the best way to beat your competition and protect your king.

Victory will only be achieved if you are in it for the long run and make the most of having one of the best positions in the house.

So let your queen take the spotlight and let her protect the king at all costs.

  • Georgina Rush

    Head of Working Capital Solutions Sweden

    Georgina Rush
    Skicka e-post

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