This is the third article in a series we first started in March 2020, differentiating what makes a member of the finance team effective. The first installment was Good CFO/Bad CFO, by Aspen Institute Finance Fellow Rob Krolik and Jeff Epstein.
Then Epstein, an operating partner at Bessemer Venture Partners and a lecturer at Stanford University, teamed up with Adam Spiegel, a former CFO for several high-growth technology companies including Glassdoor, to write Good Controller/Bad Controller.
For this installment, we tapped the experience of two corporate treasury experts: Bruce Lynn, a corporate treasury consultant and co-founder of the Financial Executives Networking Group, and Mike Richards, CEO and founder of The Treasury Recruitment Co. and host of The Treasury Career Corner podcast.
At a time when interest rates are at multiple-decade highs, skilled treasury professionals are once again hot commodities. But what do we mean by good treasurer/bad treasurer? We’re not talking about unethical or dishonest behavior, as Mike Richards, founder and CEO of The Treasury Recruitment Co., reminded me. We’re talking about skills, performance, and accountability. The question is, what distinguishes a successful treasurer from an unsuccessful one? Also important to note — across the arc of a career, an individual treasury executive could be effective, or “good,” at one company but ineffective at another.
“Unfortunately, too many treasurers become deeply enmeshed in accounting for various transactions when it is liquidity management today and tomorrow that should be treasury’s focus.”
Bruce Lynn
Co-founder, Financial Executives Networking Group
A good treasurer strives to become strategic. They perform less processing and do more planning. “They can align the treasury function with the broader goals of the organization and understand the role they play in achieving those objectives,” said Mike Richards of The Treasury Recruitment Co. A good treasurer also dispels any notion by the board of directors or CFO that they are merely tactical and deserve no place at the strategy table.
“Unfortunately, too many treasurers become deeply enmeshed in accounting for various transactions,” said Bruce Lynn, “when it is liquidity management today and tomorrow that should be treasury’s focus.” The good, or effective, treasurer prevents issues rather than merely solving them, eliminates repetitive tasks, and re-allocates processing resources to planning.
Unsuccessful treasurers have a short-term focus, said Richards. “They get caught up in daily operations and fail to think strategically about the company’s long-term financial health,” he said. They may be technically proficient, “but they struggle to make a bigger impact with the senior management team and shareholders because they get bogged down in detail and can’t describe the bigger picture — it just doesn’t seem to be in their vocabulary,” he said.
On the other hand, however, a bad treasurer can also lose sight of the finer details and thus make errors in reporting. “It’s like a mechanic who, rather than changing the oil filter at service time, might say, ‘Don’t worry; let’s change it when the red warning light comes on,’” said Richards. “By then, it’s often too late.”
A good treasurer owns the cash flow forecast. Managing the magnitude of cash flows is not their job, but they match cash sources with cash uses, said Lynn, and focus on the cash conversion cycle, not just the P&L. They are the team leader when it comes to answering the company-wide question, “How much liquidity is “enough?”
Lynn said that kind of treasurer prevents a company from being over-borrowed, under-invested, or overexposed to market forces. A good treasurer understands the company’s liquidity and risk positions frequently, if not daily, said Lynn, operating on “market time,” not “accounting time.”
A successful treasurer deeply understands financial risks and the strategies to mitigate those risks, said Richards. They track market trends and regulatory changes, “allowing them to anticipate impacts on the company’s financial standing.” A good treasurer asks questions like, “Will I be able to meet all loan covenants next quarter and the one after that?” said Lynn. Or “Is there too much risk in my short-term cash investment portfolio?
A bad treasurer fails to identify and mitigate financial risks, destining them for a “swift exit from the company,” said Richards.
"[A good treasurer] fosters an environment of continuous learning and development and encourages staff to grow their skills and knowledge."
Mike Richards
Founder and CEO, The Treasury Recruitment Co.
A successful treasurer effectively communicates complex financial strategies and concepts to finance and non-finance colleagues and stakeholders with equal levels of success, Richards said. They make their point clearly and succinctly, ensuring everyone understands the financial situation. “In my opinion, this is probably one of the stand-out differences between [treasurers] who succeed and those who don’t,” said Richards.
A bad treasurer can’t communicate complex financial information to their team, peers, boss, or other stakeholders, which leads to misunderstandings and potentially poor decision-making.
A good treasurer leads by example and inspires his or her team. “They foster an environment of continuous learning and development and encourage staff to grow their skills and knowledge,” said Richards. A bad treasurer doesn’t provide guidance and support to their team members. They don’t have a long-term vision to develop team members as treasury professionals or to advance treasury within the company as a whole, said Richards.
A good or skilled treasurer is up to date with the latest financial tools, software, and systems. They understand how to use technology to automate processes, increase efficiency, and make more informed decisions, said Richards. They advocate for special-purpose, cash-oriented systems that automate tasks like cash accounting and interest accruals and allow for cash-flow scenario planning, said Lynn. They are open to innovative ways to improve treasury operations, like artificial intelligence.
A bad treasurer is unfamiliar with the latest technologies and may rely on inefficient processes, “resulting in increased costs and errors,” said Richards. Good treasurers don’t need to be data scientists, Richards said, but they need to be able to talk to data scientists or software developers and act as the translator between what treasury needs and what software and systems can deliver.
Finally, a good treasurer is adaptable, said Richards. “The financial landscape is constantly changing.”
The format of this article is based on a famous 2012 article about product managers by Ben Horowitz of Andreessen Horowitz, the tech venture capital firm.
