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Best Practices
Best practices may mean different things to different people. In managing treasury, we believe that best practices do not exist in absolute form. That is, many best practices are determined by the organization, its structure, payments characteristics, and financial strategy. These factors can justify several kinds of best practices for a key treasury function. Therefore, there is no one-size-fits-all best practice manual. It takes an experienced eye and analytical expertise to evaluate best practice in context.
Best practices reviews can be general, like treasury audits, or they can be specific, focusing on one or two treasury activities. How to determine what best practices are for any specific function can be difficult for many senior treasury managers because they often lack the time necessary to step back and look at their practices objectively.
Projects can focus on single treasury functions, such as evaluating the acquisition of specialized software, or treasury work stations, or cash flow management procedures. In some cases, we may suggest products or services to solve a problem without a significant investment by our client. We can assist our client in making a product/service decision to the extent that an individual client desires.
At TIS we have reviewed treasury management practices at small and large organizations, and we bring that background, together with our hands-on experience in developing many of the techniques accepted as best practices today. We also draw on our nationwide network of corporate and banking contacts to evaluate treasury practices.
An example
One critical area that we review is cash flow forecasting. A typical project entails:
- Assessing the current forecasting procedures. This initial review examines the purpose of the current forecasting system and procedures and how well they work. This activity helps document current practices, data sources, timeliness of reporting, and other critical factors.
- Determining the treasury uses for the forecast. Through interviews with key personnel and examination of existing forecast and variance reports, the uses of the forecast information are documented. These uses are evaluated in general terms (e.g., do they make sense? or is the timing appropriate?) and more specifically (e.g., do they satisfy the organization's needs? could they do more?).
- Identifying additional resources to assist in forecasting. In many instances an external reviewer can spot deficiencies in the forecasting system and can recommend ways to eliminate them. Preparers and users of the forecasts often are not aware of new techniques that improve the forecasting practice.
- Modifying and/or redesigning the existing forecasts. In many cases simple changes can significantly improve the forecasting system. Recommended changes are targeted to eliminate bottlenecks, improve communications, and tighten forecasting precision.
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