Defining Liquidity Analysis

| August 1, 2017

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Liquidity analysis is a science that three+one has brought to the public and higherEd marketplace over the last several years.

Defining Liquidity Analysis

The term “liquidity analysis” has been popping up and used loosely to describe cash flow management. While both terms are intertwined, they are different.

Liquidity analysis provides a deep-dive approach into determining an entity’s need of cash at any given time while managing the asset of cash through various investment alternatives.

Cash flow management is the ability to determine the flow of dollars in and out of an organization that will determine daily, monthly, quarterly, and year-end levels. For most entities, cash flow reports are created on a monthly or annual basis.

Defining Liquidity Analysis

Liquidity analysis determines the time need, time horizons, and marketplace value of an entity’s cash while available, by dissecting each bank account and its correlation with a holistic perspective of all available cash. Liquidity analysis is also a composite of daily data, graphs, and charts that reveals both one’s cash flow needs and the value of its cash as an asset in the marketplace.

Over the last nine years the need to determine liquidity value was not needed since the short-term value on such funds was virtually non-existent. However, now that short-term rates are up, performing liquidity analyses can provide valuable insights on new sources of income and can help an entity better manage its cash.

A liquidity analysis cannot be determined on monthly cash balances alone. Rather, daily banking transaction patterns are required to determine the actual “float” available for cash needs as well as investment opportunities.

At three+one, we use our proprietary liquidity model, cashVest®, to determine cash patterns that adjust to anomalies or unexpected expenses. These data tell us the “stress levels” of all cash. In determining these levels, we’re able to provide an entity the minimum-to-maximum amount of time available for cash deposits and /or investments. This kind of information is invaluable to an entity’s bank and or investment advisor.

The better one’s liquidity is managed, the greater the level of yield that can be achieved on one’s cash. Now that this yield is averaging over 1.10%, it can be a significant source of annual income.

It’s unfortunate that so many public entities and higherEd institutions miss out on this opportunity.

A liquidity analysis is a process that takes time, expertise, and experience. At three+one, we have mastered a proprietary process that will change the way you view your cash flow and the value of your cash as a income-producing asset—without jeopardizing any legal, safety, or liquidity requirements.

If you wish to explore the proven value of a liquidity analysis, do not hesitate to contact us.

See Us At These Upcoming Events and Conferences:
NYSCTFOA Summer Conference – August
Ohio GFOA – September
GFOA SC – October
PA GFOA – October

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