What are the typical KPI used for the Treasury & Tax ?

KPIs for treasury should be answering several questions that speak to sources and uses of funds and the timing of them.:

- How much liquidity is "enough" ?
- How much risk is "too much" ?
- Does my banking structure contribute to / constrain liquidity and risk ?
- Does treasury have "enough" resources?

Unfortunately treasury has only an indirect ability to influence uses (i.e. treasury can only be reactive to businesses that use funds for CAPEX, R&D, etc). Even acquisitions are problematical as many treasury areas do not play a lead role in M & A or the company's strategic plans according to a recent AFP survey..

Also, your technology may constrain your ability to correctly plan / execute various decisions. Even sophisticated treasury management systems are usually only "dashboard ready"; it is up to treasury to decide where the "red-line" is for the company and its businesses to prevent any one part from over reving the cash engine and blowing a gasket (i.e. debt covenant).

Some of the questions above are trick questions (i.e. what do you compare enough to?). Example: A US company has 10MM Euros in the bank. Is that "enough"? Which bank? Why that many Euros vs some other currency (risk)? Who owns the 10MM?

The last question speaks to the interaction between treasury and tax. Tax often measures its performance via a target effective rate. Maintaining profits outside the US and the cash that represents may lower the corporate rate, but could expose the company to FX or interest rate risk if it has to borrow USD.

Bottom line - setting the right KPI levels should be a joint exercise with other areas in the company to allow the company to attain its business goals by balancing sources with uses.