TP TMI common mistakes
TP TMI · Understand the traps and how to avoid them.
Treating the cash position as the ledger bank balance and ignoring float - uncollected receipts, uncleared cheques, and in-transit transfers - when computing the day's investable or borrowable cash.
Candidates learn bank reconciliation as a bookkeeping exercise and then carry the habit into forecasting, so they equate 'cash at bank' with 'cash available'. Under exam pressure the float adjustments feel like optional detail rather than the substance of the question.
What to do instead
Before answering any cash-position question, write three lines: book balance, add deposits in transit, subtract outstanding payments, and state value date versus booking date explicitly. Practise with a two-day settlement lag so the habit becomes automatic.
Computing exposure netting across all group entities without checking currency, maturity bucket, or legal-entity constraints, then reporting a single 'net exposure' number.
Netting is taught as a simple subtraction, and candidates want to reach a tidy final figure. They forget that offsets only reduce risk when the cash flows are in the same currency, settle on the same date, and sit in entities that can legally offset.
What to do instead
Build a netting grid keyed on currency and value date, and state the rule you applied: only same-currency, same-date flows within the same legal entity (or under an enforceable master netting agreement) may be offset. Show gross, eligible-for-netting, and net separately.
Calculating WACC using book values or a marginal cost of debt instead of market-value weights and the after-tax marginal cost of new debt.
Textbook formulas are memorised as a single equation, and candidates grab whichever inputs are printed in the question without asking whether they are market or book, historical or marginal. Tax shield treatment is the most commonly dropped step.
What to do instead
Always write the weight derivation first: market value of equity, market value of debt, total, then weights. Apply the after-tax cost of debt as kd × (1 − t). If the question gives both book and market data, state why market values are used before computing.
Quoting a bond price or yield without specifying the day-count convention, settlement date, and clean versus dirty price, then comparing instruments on inconsistent bases.
Candidates focus on the arithmetic and treat conventions as boilerplate. In practice the same coupon produces materially different accrued interest under 30/360 versus actual/actual, and a clean-price comparison across markets is simply wrong.
What to do instead
For every fixed-income calculation, label the convention, the settlement date, and whether the answer is clean or dirty. Convert to a common basis before comparing. Practise one accrued-interest calculation under two conventions to see the size of the gap.
Designing or evaluating a TMS implementation by listing features rather than mapping bank connectivity, payment formats (e.g. ISO 20022 pain/pacs messages), and reconciliation workflows to actual process steps.
Vendor material and study guides emphasise module lists, so candidates reproduce feature inventories. They miss that most implementation failures are in connectivity, format mapping, and exception handling, not in functionality.
What to do instead
Answer technology questions as a process map: initiation, approval, formatting, bank channel, acknowledgement, statement ingestion, matching, exception queue. Name the message type or file format at each step and identify where straight-through processing breaks.
Treating a compliance scenario as a policy-recall question and answering what the rule says, instead of identifying the escalation path and the specific control that failed.
Candidates revise regulations as facts to memorise, so they answer 'what is required' when the question asks 'what should the treasurer do next'. Ethics items are usually testing judgement and escalation, not citation.
What to do instead
For scenario questions, structure the answer as: obligation triggered, control that failed, immediate action (stop/suspend), escalation to whom, and record-keeping. Choose the option that escalates and documents rather than the one that resolves quietly.
Ignoring counterparty credit limits and concentration when recommending a deposit or hedging counterparty, focusing only on the rate or hedge ratio.
Yield and hedge effectiveness are the visible numbers in the question, so candidates optimise them. Limit utilisation, ratings triggers, and concentration ceilings are treated as background rather than as binding constraints.
What to do instead
Before recommending a counterparty or trade, state the current limit utilisation and the post-trade utilisation. If the trade breaches a limit, say so and propose splitting across counterparties or reducing size, even if the economics are attractive.
Building a cash forecast as a single point estimate with no variance analysis or assumption register, and no separation of operating, investing, and financing flows.
Candidates equate forecasting with producing a number. They skip the classification and the accuracy-tracking discipline that make a forecast usable for liquidity planning and covenant monitoring.
What to do instead
Present forecasts in the three-activity structure, list the three or four assumptions that drive most of the variance, and include a rolling accuracy metric (e.g. 13-week forecast versus actual by week). State the confidence interval or sensitivity for the largest line.
Confusing accounting profit with cash generation - deducting depreciation from cash flow, or ignoring working-capital movements and capex when assessing funding need.
Profit-and-loss thinking is deeply practised, and depreciation is the most familiar non-cash item, so candidates over-correct and subtract it. They also forget that growth absorbs cash through receivables and inventory.
What to do instead
Reconstruct free cash flow line by line: EBITDA, less cash taxes, less working-capital increase, less capex, less interest. Add back depreciation only in the bridge from profit, never as a cash outflow. Sanity-check the funding need against the change in net debt.
Answering strategic treasury questions with generic objectives (reduce risk, improve efficiency) instead of a quantified trade-off between liquidity, cost of funding, and risk, tied to the stated constraints.
Strategy items reward structured reasoning, but candidates default to safe-sounding generalities because they are unsure how to score the options. The result reads as filler and earns little credit.
What to do instead
Frame the answer as a decision: options considered, the constraint that binds (rating, covenant, liquidity buffer, counterparty limit), the quantified cost or benefit of each, and the recommendation with its main risk. Name the metric you would monitor and the trigger for revisiting.