Catching the Wave

If your entity has $5 million cash on hand and is not earning at least $40,000 to $60,000 on that amount in interest income (depending on permissible investment options in your state), then you are leaving money on the table.

Catching the Wave

Interest rates are going up and the opportunity to capture the new wave in the direction of short-term rates is now.

The Federal Reserve wants to push short-term interest rates back to a normal level, which would equate to a 2.5 to 3.0% yield.

Each 25 basis point increase in federal fund rates represents an additional $2,500 of income on each million dollars of cash proactively managed and monitored.

The average public entity with an annual budget size of $25 million will see a float of at least $5 million throughout the year, providing there is an opportunity to produce annual income of $40,000 or more, based on an average marketplace rate of 80-120 basis points (.80-1.2%) and on a time horizon of 12 months or less.

At three+one we offer a solution to help public and Higher Ed entities recognize the time value of their cash on hand, while implementing a strategy—through the use of our data—that will recognize the true value of their cash in the marketplace.

The time to capture the wave of rising rates on your operating and non-operating cash is now. If proactively managed, your budget line for 2017/2018 will increase dramatically over previous years.

And that is sure to make everyone happy.

———————————————-

See Us At These Upcoming Events and Conferences:

NYS GFOA Annual – March 29-31 (See Our Presentation March 30th at 2:30 p.m)
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4

Bank Innovation 2017

I recently attended the Bank Innovation 2017 conference, held in San Jose, CA. From my perspective, this year’s conference had a completely different tenor from the one a year ago. Something had changed over the past year, but it was something that we have been talking about at various conferences for over a year.

Bank Innovation 2017

Now we are starting to see it happen.

For much of the past three or four years when you read a blog or news article about startup financial technology (FinTech) companies, it had been in light of bank disintermediation or disrupting banks. As exciting as that sounds to startup companies—and those that may not favor the banks—it had always been seen as a herculean task.

At the various conferences at which we have presented, we opined that the more likely scenario would have banks watching FinTech developments and, when the time was right, either purchase or partner with the firm whose FinTech products and services appeared to have longevity and would likely appeal to broad consumer groups.

This indeed is what had changed from the 2016 conference. Big banks had a major part of the agenda this year. No longer was the discussion around bank disintermediation, but rather around bank partnerships. Small FinTech startups no longer looked at banks as the Goliath to defeat but rather as potential partners, customers, and vehicles to make the innovations they’ve created broadly available to large consumer markets.

Bank Innovation 2017

The banks themselves recognized the need for small FinTech partners, because they recognized that they are indeed large institutions, with large risk/compliance, purchasing, and legal departments that slow the rate of innovation internally.

The other significant change was a shift from the innovation hype itself (the “let’s run and look at every new thing being thought of” mindset) to practical, real solutions that have the longevity needed to change how people transact financially.

This was exciting. I left the conference thinking that we are indeed getting closer to a time when checks will no longer play a significant role in our financial services—perhaps even being eliminated entirely. For the first time, I left with a sense of urgency, feeling that those organizations that do not proactively manage their way through the changing landscape of payment technology will one day wake up and have it forced upon them.

That will be an expensive and painful reality.

Love Thy Banker

In today’s complexities of public and higher Ed banking, the level of work, care, and attention that is expected and required of your banking partners is at times unrecognized and is often taken for granted—by both clients and senior banking management alike.

It is not easy being a banker. How would I know? I was one.

Love Thy Banker

The world of banking is not easy given the many federal, state, and local regulations added since the financial crisis of 2008. At the same time, the focus of top senior banking management has been on regulators, net profitability, protecting silo turfs, constantly changing sales & bonus plans, and internal 360 performance measurements. All this, overshadowed by a deluge of internal conference calls, has left local bankers much on their own, with less resources in managing their client relationships.

A banker should be considered a business partner to both you and your entity. Those individuals that serve you are what I consider “unsung heroes.” They need to always work to balance the pressures of serving their clients while dealing with constant changes to their banking institution, made either by regulations or by their own bank’s structure.

What banks of all sizes need to do is put more bankers on the street, Main Street. Leaving communications up to an “800” number menu doesn’t serve clients or banking institutions well. Bankers with government and higher Ed clients need to follow an in-person strategy where it’s relationships first—and retention over sales quotas.

It is my prediction that banks of all sizes will need to get back to the basics: community focus with local delivery. The banks that do, will dominate the public entity and higher Ed marketplace.

At three+one, we have the highest regard for public and private bankers as they deliver valuable deposit, lending, and treasury services in a challenging marketplace.

We strive to be the link between identifying a client’s low- and non-performing operating and non-operating cash, while helping financial institutions recognize the value of such funds, both on behalf of the client and that of the banking institution(s).

By working together, a new level of income will be achieved for public and higher Ed entities, while the bankers will find us a new resource to help strengthen their banking relationships.

———————————————-

See Us At These Upcoming Events and Conferences:

NYS GFOA Annual – March 29-31 (See Our Presentation March 30th at 2:30 p.m)
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4

The Evolution of the Lockbox

Since the inception of lockbox services by banking institutions in the 1930s, lockbox servicing has had some sort of an evolution. From large, manual, and labor-intensive processing centers to today’s technologically advanced computer software programs, the evolution of lockbox services has evolved at a pace never anticipated by public entities.

Lockbox servicing started over 80 years ago as a way for banks to be the first to access incoming cash from companies that owed them money. From there, banks offered their government clients lockbox services as a convenience measure to enhance relationships with their public clients. Since then, lockbox servicing has been a beneficial and often an essential tool for public entities.

 The Evolution of the Lockbox

In today’s financial environment, is there possibly a more economical solution that can have a positive income effect on public entities? I think there is.

With continued technological expansion, sustained reductions in check usage (in many localities), and increased in-house check processing tools (enabling autonomous internal check processing), entities need to reexamine/analyze their banks’ lockbox services to be sure that it is still the most economical and practical option for your entity.

Believe it or not, customer-to-government (C2G) payments are moving towards electronic payments. As more constituents are paying with fewer checks, lockbox servicing becomes more expensive. In fact, in some cases there is an immeasurably sluggish desire for banking institutions to offer lockbox servicing. What’s more, the containment of lockbox servicing is often based on an entity’s geographical location.

So what does that mean for you? We all know the pros of utilizing lockbox services, but have you considered an internal lockbox solution? It could be more financially beneficial for your office.

With more lockbox servicing taking place out of state, there are often higher fixed, variable, and per-data-point costs to absorb. Now that there is better—and more affordable—technology available to you, it makes sense to look closely at what you’re paying to maintain outside lockbox services.

If you need help designing a cost-benefit analysis for developing your own in house lockbox services, or would like assistance developing your own cost-effective in-house lockbox system, let us know.

———————————————-

See Us At These Upcoming Events and Conferences:

NYS GFOA Annual – March 29-31 (See Our Presentation March 30th at 2:30 p.m)
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4