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Case Study

How Microsoft Streamlined Visibility into Cash Flows

Treasury and finance teams developed a new, automated platform that provides actionable liquidity insights to corporate leadership.

Photo: Microsoft team (Shreyas Kulkarni, Shyamala Kuppusamy, Dennis Crispin, and Scott Masters)

When Microsoft’s leadership team is making strategic business decisions, they want information about cash flows from operations. “There is a great deal of scrutiny around cash flow from operations and free cash flow generation for a company like Microsoft, so visibility into drivers of cash flows is crucial,” says Shreyas Kulkarni, who, until a recent change in role, was the group manager for reporting and business insights on Microsoft’s Global Treasury & Financial Services (GTFS) team. But historically, liquidity information was a bit opaque.

Like many of its peers, Microsoft used the indirect method, as permissible under generally accepted accounting principles (GAAP), to determine cash flow from operations. “The traditional way of analyzing cash flow is based on changes in account balances across different drivers, which is used to prepare analyses around cash flow from operations,” says Kulkarni.

“But changes in A/R [accounts receivable] and aging don’t clearly reflect how billings convert into cash,” Kulkarni continues. “Looking at bank account activity to determine a company’s cash inflows and outflows has limitations. Because of Microsoft’s size and scale of operations, we have a lot of accounts, and getting balance information requires collaboration with a lot of different teams.” Collecting the bank data took time, as did ensuring that each team’s data used consistent assumptions and was ready to be slotted into the corporate cash flow framework.

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Meg Waters

Meg Waters

Meg Waters is the editor in chief of Treasury & Risk. She is the former editor in chief of BPM Magazine and the former managing editor of Business Finance.

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