A Cash and Liquidity Management Strategy Designed for Winning

# Cash and Working Capital

Former HP treasurer and NeuGroup member Zac Nesper shares questions that unlock corporate treasury's full value to the enterprise. Today's focus: part one of his insights on cash and liquidity management.

Zac Nesper

Editor's note: Zac Nesper's 20 years at HP included stints in FP&A and multiple treasury roles before he served as treasurer for five years. He led HP's treasury separation into two companies large enough for the Fortune 50, dealt with fallout from the pandemic, and helped defeat a hostile takeover attempt by Carl Icahn. His other articles on managing treasury through a strategic lens focus on FX risk management , working capital management , treasury talent and a two-part look at capital structure . Cash management is the foundation the rest of treasury stands on, and the part most likely to be taken for granted. Capital structure reaches the board and FX losses reach the earnings call, but the daily machinery of cash is invisible when it works and existential when it fails. Most treasurers inherit this machinery rather than design it, and the inheritance shows. HP was no exception. Before the 2015 separation , the combined company had several thousand bank accounts. HP Inc. alone emerged with 85 banks and more than 1,100 accounts, tens of millions of dollars a year in bank fees, no daily view of our cash and no forecast beyond six days. I asked our CFO for $4 million to fund a transformation. She gave us her full support and no budget, so we self-funded it, starting with bank fee savings and letting each win pay for the next. Over four years, we closed nearly 400 accounts and 27 banking relationships, cut bank fees by 60%, connected 80% of our accounts through SWIFT, freed $2 billion of trapped liquidity and reached 100% daily visibility to cash in every account around the globe. We estimated the project would generate roughly $150 million in net present value. It delivered more than double that. The value showed up in 2020. When Covid shut our factories in Asia, our negative cash conversion cycle went from friend to foe: collections slowed against a 30-day DSO while payables kept running closer to 90 days, and the intra-quarter swing in cash flow was measured in billions just as the commercial paper market closed. We managed through without incident. We had borrowed commercial paper before the market shut, accelerated a $1 billion revolver addition, and lined up nine banks and five insurers to support our customers and suppliers. We never drew on the revolver while panic drawdowns elsewhere made a fragile market worse. Here are six strategic cash and liquidity questions for CFOs, treasurers, and boards. I’ll share four more next week. Visibility, Forecasting & Cash Intelligence

1. Do we have timely visibility into every account worldwide, and do we know how much of that cash is available to deploy? Pro tip: You cannot manage what you cannot see. Daily visibility across every account is table stakes and real time is becoming the bar. Headline cash is not available cash: Balances in joint ventures, regulated entities and minimum operating buffers are not deployable, and boards deserve to see both numbers. Our best view of cash originally took the better part of a week to assemble, and we produced it only once a quarter. Getting to 100% daily visibility changed every crisis conversation that followed. 2. How accurate is our cash forecast, do we measure the misses, and does the forecast drive our funding and investment decisions? Pro tip: Run two engines: a short-term direct forecast for funding and investment decisions, and a longer-term indirect forecast that connects to capital allocation. Then close the loop: measure forecast-to-actual variance by entity and by category and chase the misses, because variance analysis is where a forecast improves. AI is now good enough to run a machine forecast in parallel with the traditional one, with the gap between the two providing a third dimension of variance. Our APAC team took cash forecasting from fully manual to fully automated, work that won an Adam Smith Award in 2024. A reliable forecast shrinks precautionary buffers, extends investment tenors and grounds downturn planning.

Structural Efficiency: The Plumbing

3. Is our cash concentrated into structures where we can use it, or is it scattered across subsidiary accounts where it sits idle? Pro tip: Every dollar idle in a local account is potentially a dollar the parent is borrowing at the same moment. Sweep cash to the center through physical or notional pooling structures and know which countries cannot participate and why. Measure the share of global cash usable within 24 hours and drive it up; it is one of the highest-return projects in treasury. I met with a treasurer on the day I wrote this who had a fully automated and prompt-accepting AI dashboard to show exactly this. Concentration and visibility together eventually let us run HP on roughly half the operating cash we had needed at separation. The difference funded buybacks and debt reduction and helped defeat a hostile takeover attempt. 4. Are we funding our divisions through an in-house bank, or are we paying banks a spread to stand between our own entities? Pro tip: An in-house bank centralizes intercompany lending and borrowing, nets funding needs across the group and gives treasury one integrated view of internal positions. The prerequisites are unglamorous: clean intercompany agreements, arm's-length pricing, tight alignment with tax and a system build that comes at real cost. Internal funding is also the platform that makes pooling, netting, payment factories and centralized FX visibility and hedging easier to build. The group can borrow once, at the parent's cost of funds, instead of dozens of subsidiaries overpaying. Housed in the right jurisdiction, an in-house bank can add tax efficiency on top. 5. How much of our settlement volume, intercompany and FX alike, is settled gross when it could be netted? Pro tip: When we started the transformation, our subsidiaries were settling with each other through external banks at a scale that dwarfed our commercial flows. We were paying banks to move money between our own entities. Implementing cashless netting eliminated tens of billions of dollars in external financial flows, and the fees, FX spreads and operational risk that traveled with them. Net FX exposures internally before hedging externally, so you only pay spreads on the residual. 6. Does our bank account and banking relationship footprint reflect deliberate design, or just the accumulated history of the company? Pro tip: Every account creates fees, KYC and FBAR obligations, audit work and fraud exposure. Dormant accounts are risk with no return; close them. Our 85 banks and 1,100-plus accounts at separation were not designed by anyone; they were what acquisitions and local workarounds left behind. Closing nearly 400 accounts and 27 relationships took years of patient work and paid for the entire transformation through a 60% reduction in bank fees. Apply the same discipline to the bank group: Align your wallet with the banks that commit credit to you.

Part two of this article will address: funding, deployment & investment; governance controls and fraud; technology, data & the future.