The simplest questions are often the most difficult to answer. Not too long ago, when Microsoft CFO Peter Klein asked, “How much cash do we have this morning, and where is it?” it would precipitate a fire-drill response within treasury to come up with the answer. To make matters worse, there often would be discrepancies in the answer because different treasury groups had their own definitions for “cash.” Those responsible for bank balances would produce a different number than portfolio managers, whose answer would differ from the tax team’s.
“This is what got us on the quest of, when we say ‘cash’ that we all mean the same thing,” explains Anita Prasad, general manager of treasury capital management at Microsoft. “It might sound simplistic, but when we got into the details, reconciling the definition of cash is very important. For example, accruals might be included. And if you look at actual hard cash that we can use, you also need to look at liquidity, whether it is invested in equities or in U.S. or foreign bonds.”