Recently the Federal Reserve has come under increased pressure to pull back on its rising-rate strategy, which started at the end of 2017.
Over the last 24 months, short-term Fed fund rates have risen from a zero baseline to 2.25%. The Fed’s rate target is between 3.0% to 4.0%. This strategy has come under pressure due to new concerns over a potential stalling in the nation’s economic growth.
Whether the Fed continues on its current path or not, the effective and proactive management of your cash should be a top priority. Either way, all cash has value and the ability to match liquidity to the time duration will determine the yield that can be earned through your financial institutions.
By having a quarterly liquidity analysis, your entity will be able to capture all the necessary data to determine your need for cash vs. maximum investment opportunities. The result: all available cash will be earning the highest yield, while remaining legal, safe and liquid.
Keep in mind that cash-flow forecasting is far different from a liquidity analysis. Cash-flow forecasting projects highs and lows of cash levels of revenues vs. expenses. A liquidity analysis weighs all patterns of cash within an entity for its cash needs vs. the time horizon of dollars for investment.
Cash-flow forecasting and liquidity analysis should be projected side by side, on a regular monthly or quarterly basis. Doing this leads to greater efficiency and higher interest earnings on “all cash.”
The three+one team specializes in providing liquidity analysis and data to public and higher Ed entities. Our proprietary modeling creates time-horizon levels on all cash and matches it to its value in the marketplace, leading to new sources of interest income.
Either way, whether the Fed boosts short-term rates or holds them steady, your cash has great value. Now’s the time to seize the opportunity for both your entity and those you serve.
