As new opportunities arise so does the potential for rewards. Over the past 24 months we have seen the value of cash grow thanks to two major factors: the rise in short-term interest rates and the increased application of new technologies.
Since 2016, short-term rates have gone from zero to 200 basis points, i.e., 2.00%. This substantial change can enable public entities and higher Ed institutions to garner tens to hundreds of thousands of dollars in newly realized interest income.
When you couple these higher rates with the power financial institutions have as they embrace new technologies, you can see why the opportunity to better manage your cash has never been greater.
Your ability to seize this new opportunity is exactly that: new. If asked why an organization had not done it sooner, the reason is simply that the opportunity did not exist—especially when the interest earned on cash was very low or non-existent.
At threeplusone®, we help public entities and higher Ed institutions understand what the cash they have on hand can mean in added profitability. We help them realize the full value of cash through the advanced technology now offered by their financial institutions. By applying the latest innovations in liquidity management, we’re helping our clients command better control and accountability of their cash. And that can mean thousands of dollars in unexpected income, month after month.
We see exciting days ahead in liquidity and cash management. The ability to seize these opportunities will lead to a better financial future for your organization and those you serve.
“One-year Treasuries will reach between 1.50%-2.00%.” – three+one Blog Post on June 6, 2017
Over the last several years, we have provided guidance on what public entities and higher Ed institutions should budget for in interest income for the following year. I am pleased to say that we have been very accurate in our forecasting. We will continue to provide an independent perspective to the value of an entity’s operating and non-operating cash.
With the Federal Reserve taking action last week to increase the Fed fund rates by another quarter of a percent (i.e., .25%), the rate is now 1.75% compared to 1.00% at this same time last year. I expect at least one, if not two, more quarter-percent increases by yearend.
The basis of the Fed’s moves is to bring short-term rates back into their normal historic levels (3.0% to 4.0%). The level of these rates will help temper the potential of an overheating U.S. economy; that could lead to unexpected and unwanted inflation levels.
So, given the Federal Reserve’s action and the anticipation of more moves, what should you plan to budget for investment income in 2019?
First, short-term rates will hover between 2.50% to 3.0% by the end of 2019. As a result, a conservative average range to budget should be 2.50%.
Second, bank deposits will lag these increases, but should still average between 1.0% to 2.0%.
Third, short-term Treasuries will move more aggressively in anticipation of more increases by the Fed. As a result, 30- to 90-day Treasures will likely predominate as investments for public and higher Ed entities.
Please note, your budget line for 2019 should reflect an increase of investment income by 25% to 50% or more if you are proactively managing your cash as an interest-earning asset.
At three+one, our sole mission is to help public entities and higher Ed institutions identify all cash as an asset. We can provide the time horizon and marketplace data to share with their financial institutions to achieve the highest rate of interest earnings on their cash. These entities can use the extra income to lower taxes or help alleviate budget constraints.
As I emphasize almost every week, your cash has value and it is only increasing with every rise in short-term rates. After all, it’s your taxpayers’, students’ or ratepayers’ money you’re dealing with. So let’s make the most of it in 2019!
It’s back to the future. We thought cursive handwriting was long gone, but it’s coming back as a lost art.
For those of us who are baby boomers, it started with pencils in third grade and followed with a ink pen in fourth—and then on for the rest of our lives. But over the last twenty years or so, cursive lost its meaning and usage.
When people stopped handwriting letters and chose quicker means to communicate—emails and texts—the die was cast. Banks, higher Ed, businesses, and even the postal service have seen far lower letter volumes, all thanks to digital technology.
But there is hope! Generation Z kids, those born after 2000, eager to communicate with their grandparents and other baby boomers, are creating a renaissance for cursive writing.
The same parallel can be made around the value of cash. For eight years, your cash earned practically nothing. As a result, the desire to even put cash to work lost its way, becoming a practice of the past.
Well now that has changed—the ability to earn revenue on your cash is back. It does need attention, but making cash a priority could enable an entity like yours to reap tens to hundreds of thousands of dollars each year.
At three+one we can tell you what the revenue potential is on your cash—all of it. We can then help you realize the full value and yield of that cash and ensure it remains legal, safe, and liquid.
One should never forget the adage “what goes around, comes around.” Cursive writing proves it and so does the value of putting your cash to work.
One of the most precious assets we have, both personally and professionally, is time.
Your need for more time is sometimes in your control and, at others, out of your control.
When it’s in your control, do you take advantage of it? When it’s out of your control, is there anything that can be done to prepare for “just in case” situations?
The ability to predict the value of time related to cash can be in your control, either at your hands or someone else’s. However, all too many times, the safety valve for many of us is to just leave the cash on the sidelines for those “what-if” circumstances. When that’s the case, while you may think you’re controlling your cash, your inaction may lead to lost opportunities that are out of your control. And for that you may be judged negatively by those you serve.
Historical ebbs and flows of cash value create patterns that enable you to better understand what was and also predict what may be going forward.
The value of cash is time based. When you know the time horizon of all cash that flows in and out of your entity, the greater your ability to take advantage of the value of your cash.
Every penny of your cash has value in the marketplace, but the level of that value depends on time. The more time you have, the greater the value of your cash. By managing the time value of your cash, the more money you can make—and that is in your control.
three+one can establish a time value on all your entity’s cash—and put is control directly in your hands. Our proprietary algorithms use historical data to determine optimal liquidity and safety needs going forward. Using our liquidity data, your entity can earn greater interest income, with greater confidence.
Even when circumstances may be beyond your control, your cash will remain safe and liquid, and still earn money for your entity.
That’s what having control over time is all about.