Recipe for Success: Building a New World-class Treasury during Lockdown

When Patrick Kunz, Interim Treasury & Finance Consultant, started at Takeaway.com, the treasury function did not exist. Building one from scratch is the dream scenario for many treasurers. But when – on only the third day of this endeavour – the world went into lockdown as a result of the Covid-19 pandemic, that dream could so quickly have become a nightmare. TMI finds out how Kunz managed to come out the other side smiling.

‘Day one: start new project building a treasury from scratch. Day three: global lockdown starts.’ It’s the kind of diary entry that could drive many professionals to despair. But for Kunz, the challenges thrown at him almost as soon as he started with global food delivery service Takeaway.com only made him more determined to create a world-class treasury. And now, having integrated the Takeaway operation into that of its new acquisition, Just Eat, his approach has a fully scaled-up global seal of approval.

In a rapidly expanding worldwide business, relying on disparate and disconnected financial functions to pull together treasury data is a challenge few can sensibly sustain. Finding this scenario upon his arrival at Takeaway, Kunz knew that his role over the next few months was a matter of necessity.

The business had risen in just one decade from a promising SME (small to medium-size enterprise) into an international operation with a number of competitor acquisitions and integrations already under its belt. But without a professional treasury function, it was facing an uphill struggle to provide essential cash visibility. When Kunz challenged the Finance Director to quickly identify the company’s current cash positions, the answer came in the form of a worried look.

Although he had access to all the company’s multiple banking platforms, pulling that information together at short notice was not easy. While profit and loss (P&L) forecasting was robust, as befits a company with a strong financial planning and analysis (FP&A) function, when asked to quickly forecast cash positions or calculate the cash flow effects of a revenue downturn or significant bout of late payments, the concern deepened.

What was needed, noted Kunz, was real-time cash flow forecasting. This would be achievable by harvesting all cash flows from the company’s banks as the starting point, and then adding known information, such as accounts payable (AP) and accounts receivable (AR) data, from its enterprise resource planner (ERP), building that into a liquidity forecast.

Methodical approach

When tackling a greenfield project such as this, Kunz has his own three-pillar approach. Cash visibility – in real time if possible but prior-day close of business (CoB) as a minimum – and forecasting comes first. Pillar two considers the financing structure that results from the cash position. The third pillar is risk management, with interest-rate risk management bound with debt financing and, particularly for Takeaway, FX risk mitigation.

Indeed, without a hedging policy or even facilities in place, with considerable non-euro cashflows and significant costs in dollar and sterling, the company relied almost entirely on achieving natural hedges through in-country cash flows. This, says Kunz, created substantial needless FX costs.

In preparation, setting up new bank accounts was an easy quick win for him, working with Takeaway’s “very proficient” IT team to finish the task in one week. By enabling separation of all the euro and non-euro invoices, it was now possible to distinguish between the group’s various exposures. Payments would not now be sent to the wrong bank account, avoiding unnecessary FX conversions. A hedging policy could also now be implemented.

Takeaway had two existing banking partners providing its main cash management overlay structure. These banks were to be used for FX trading, but for “liquidity and pricing reasons” external parties were also brought in for quotes. Initially this was through a broker, and then via the cloud-based 360T platform, enabling huge savings (this alone paying for Kunz’s interim costs).

Lockdown planning

“I was in the office two days and then the lockdown hit, and because of that it was unclear what the situation was going to be,” recalls Kunz of his initial planning phase. Takeaway was in a marginal cash-positive position. It had some facilities in place, but these were designed for longer-term drawdowns. While many companies did draw down on facilities ‘just in case’, he argues that doing so, especially in the Eurozone’s negative interest rate environment, created a costly cash holding.  

As such, and with poor forecasting capabilities and total uncertainty regarding the rules on restaurant openings and deliveries, his main priority from the outset was scenario analysis and stress testing cash. For around one week he probed the effects of variously shifting payments and collections cycles, with revenues potentially diminishing by certain percentages, even by up to 50%.

In the first week of lockdown sales did indeed drop. However, as clarity emerged on the status of food deliveries, Takeaway saw its revenues boosted considerably as eat-in establishments remained closed. “We had one bad week, then it was up, up, up.”

With Takeaway’s cash position increasing rapidly into the realms of “cash-rich”, Kunz’ focus shifted away from stress testing. Around this time, Takeaway secured a €450m bond issuance and a capital increase from a refinancing round. It also benefitted from a share increase from the takeover of Just Eat, and it was boosted by the planned takeover of Grub Hub entering the financing strategy stage.

From this position of relative comfort, Kunz could now turn his attention to building a treasury structure, with attention on bank accounts, FX risk management, inter-company financing and company positions. This took a couple of months, during which time approval was granted by the Competition and Markets Authority for the integration of Just Eat. This more than doubled the size of Takeaway.

Combined forces

Just Eat had its own treasury, with a director, manager and analyst. With Kunz previously working solo, joining forces to create a structure for Takeaway naturally made life easier. However, in being forced to work remotely, he found the communication process with people he had never met occasionally challenging. And with new ideas being proposed, change management was at times difficult too. “I was changing processes, and for some people I was relieving workload but for others adding a little.” There was a natural tension here, but he says it helped enormously having the full support and backing of Takeaway’s finance director.

The Just Eat treasury accepted all that Kunz had put in place. In some instances (such as the implementation of 360T) the work even overlapped. But there was a fundamental difference. Takeaway had adopted a more centralised model, with just two banks and an overlay structure that saw, for example, all cash swept to its Amsterdam euro cash pool. Just Eat was operating on a per-country approach, with 10 banks. Although more complex to run, it had a dedicated treasury team, and thus the capacity to do it. Obviously, it also had deep knowledge of the operating side of Just Eat treasury.

With various core technologies replicated between the two firms, including ERP and payments systems, both Kunz and his counterparts considered the likely complexity of bank connectivity, especially with Just Eat retaining its multi-banking model. “It made sense to implement a TMS [treasury management system], so that was on my wish list,” he says.

With payment hub, in-house banking, cash flow forecasting and FX risk management functionality on the sublist, a joint proposal had been made to the Finance director to free up some budget for this, with early market explorations underway. However, with integration now taking absolute priority, and no decision having been taken at that point on the fate of the two ERPs, it was deemed prudent to wait. The impending Grub Hub deal further upheld this response, its addition (set for 2021) creating “an even more complex company”.

All good things…

Having initially having scoped a greenfield treasury operation, and achieving much of what he had planned during lockdown, the merger changed things further for Kunz. Although he still had work to do, mostly on aligning operations, including locally fine-tuning a shared treasury policy, his assignment ended in July. As other functions were selecting their new heads for the merged business, he acknowledged the sense in offering a permanent role to the incumbent treasurer at Just Eat, rather than himself as an interim.

Nonetheless, he believes that it has been a deep learning experience throughout. He would have preferred to have been office- rather than home-based for the bulk of the work, arguing that face-to-face meetings enable quicker and clearer lines of communication. “You can still do your project management online, but it has to be much more formal,” he notes.

Zoom meetings have earnt their place in current business practice, says Kunz, but quick updates or clarifications are just easier face to face. In particular, he missed those ad hoc conversations upon which professional life thrives, underlining too the risk inherent in written messages, where misreadings are familiar to most practitioners!

Remote working can also take up more time. “Some days I would spend more than half my time on phone calls or Zoom meetings; if I’d been in the office it would have been much less,” he says. That said, with both the ERP and various communications systems fully cloud-based (Slack instant messaging was leveraged fully, he reports) most stakeholders were able to remain in the loop.

With Kunz already on a new set of interim assignments, one with Amsterdam-based design consultancy Arcadis, he has moved into established operations. Of course, lockdown and remote working is still a fact of life for many professionals, but it is encouraging to know that an effective global treasury can be built and run from home. And lunch can be delivered.