Bird’s-Eye View of Treasury

October 9, 2019

Demands on corporate treasury are changing. Is your chief financial officer equipped to keep up?

The rapid pace of growth across industries, including aviation, and related regulation have left too many companies lagging behind on carrying out even the most fundamental treasury functions, such as cash management, banking, debt and funding, investments, and risk management for currencies and interest rates. Such shortcomings are only amplified as companies expand into new markets, often lacking an operating model and infrastructure to support their activities, portfolios and risks.

“Be it an operational task or strategic, treasury is a vital function not only of the finance department, but also of the company as a whole,” explains Joey Johnsen, Zeevo chief executive officer. “And, while some companies carry out treasury tasks within their accounting or financial planning and analysis teams, other companies have a fully implemented treasury team operation, with an established treasurer role.”

As companies evolve so should their treasury function. Treasury is primarily concerned with liquidity and ensuring enough cash, whether in the bank or open credit lines/ facilities, is readily available for the organisation to survive – cash is king – it is the lifeline of any organisation, and treasury keeps the heart pumping.

In aviation, funding and liquidity are at the centre of this highly capital-intensive business, as diversity of products, lenders and pockets of capital across the globe are paramount to ensuring obligations can be met.

Any rapidly growing business understands the importance of funding its model, and leadership wants to know how much cash is needed to ensure continued growth. This is why cash forecasting, both long and short term, is so vital. Cash forecasting identifies funding needs, and when they arise. It allows the business to anticipate this need and start now to identify the optimum funding solution and structure it – whether it is equity or debt based, or a combination of both.

As the business begins to enter into contracts, potential contingent liabilities may arise, raising concerns around what it means to the business and, specifically, its debt agreements and balance sheet structure.

Cash flow always remains critical, and, in particular, when the business starts to look for new markets; thus, beginning to deal with foreign exchange risks and other macro environment issues. Moreover, the potential regulatory, taxation and insurance requirements may further complicate matters.

Optimal treasury organisation and operating model
The strategic importance of treasury has increased steadily over the years and has had an impact on treasury departments’ structure and operations, with the increasing complexity of business strategies and the accelerating pace of change.

“Finding the right response to the right questions on the CFO’s agenda can make the difference between a thriving company with ample liquidity and an organisation struggling with liquidity and credit downgrades,” explains Paul W McDowell, a member of Zeevo’s advisory board and vice-president and treasurer of GoDaddy.

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(Source: The above article appeared on Oct 8, 2019 in Airfinance Journal’s Annual 2019/20. Published with permission from Airfinance Journal.)

Zeevo Group can help transform your treasury team, not only as far as systems, but also global banking footprints, cash pooling, cash forecasting, investing, business flow structures to minimize foreign exchange, capital structure, and other related areas. Zeevo has your leasing platform covered in all aspects of treasury, from nose to tail. Learn more about Zeevo’s treasury advisory and/or contact Joey Johnsen at jjohnsen@zeevogroup.com.