A personal relationship with your banker is everything. Being a good customer1 has its rewards but also comes with responsibilities.
Last week, I had a meeting with a local banker. She told me how much she enjoys personal interactions with her clients. She shared a story about a customer who had stopped by her office to just say hello and drop off a cup of coffee. A few weeks later that client called for help on an unexpected matter, and she responded immediately. His request required critical information and needed higher management approval. However, based on her knowledge of and relationship with the client, she was able to address all his questions while he was still on the line.
So many times we expect bankers to react to our requests at a moment’s notice. However, given higher demands and the need to service many clients, the ability to respond swiftly is often directly linked to the strength of the bond between client and banker.
So what does this mean?
1.) Given Dodd-Frank regulations—yes, they’re still in place—and the need to “Know Your Client,” strong communications between banks and entities are a must. No matter who initiates the call, please respond as soon as possible. Both sides need to get in the habit of responding quickly; that’s especially important when an unexpected need or emergency occurs.
2.) It’s healthy to meet with—or call—your banker at least once a quarter. This can be a challenge if you have multiple bank relationships. Make your primary bank and/or lending institution your top priority; secondary banks require only an annual meeting and review.
3.) Call, email, or stop by every once in awhile to just say hello. Let me assure you, as a former banker, such a greeting, with no requests attached, goes a long way. Those friendly touches will be remembered if and when you have to make special request later on.
4.) When there are significant changes at your office, notify your bankers. Provide any essential information as well as any forms the bank may need to keep on file. Don’t surprise your bankers well after the fact. This can cause mistrust and lead to delays when time is tight or the need is great.
5.) The right fit and comfort level are important elements to a healthy bank relationship. If you make an effort and you get little response back from your banker, then it might be time to consider a new banker.
Given our business, public service, higher Ed, and government banking experience, we believe in the strength of an engaging banking rapport. The value of a strong customer relationship with your banker(s) is everything, which will lead to better pricing, proactive deposit rate increases, and a quicker ability to respond to simple or complicated requests. And that will enable you do more for those you serve—your customers2.
Definition of customer (noun)-
1. Informal: A person one has to deal with or through.
2. A person who purchases goods or services from another; buyer; patron.
Origin 1400-50 late Middle English
With one natural disaster after another, this year has tested communities across the country. From wildfires out west to flooding in the midwest and hurricanes in the southeast, the level and intensity of these disasters have put strains on us all.
The ability to cope with such disasters is as serious as the aftermath of cleaning up and moving on. For public entities and higher Ed institutions, being a leader in dealing with and bringing back normalcy is paramount. But doing so poses many challenges.
After any momentous emergency, the challenges are staggering. Local organizations strive to partner with state and federal agencies to provide relief and support. The altruistic efforts quickly become financially draining as the paperwork mounts up, quick reimbursements for claims and expenses get bogged down in a bureaucratic morass—and then the finger pointing starts.
Being ready for “just-in-case” emergencies and natural disasters is essential when it comes to financial preparedness, especially when you are not pressed to do so.
Here are five steps a public entity and higher Ed institution can take to be financially prepared in case of an unexpected disaster:
1.) In preparing a monthly, quarterly, and annual cashflow statement, set aside funds for a “just-in-case” scenarios, those least expected circumstances. Prepare a liquidity plan for when—and how—to get your hands on cash in a hurry.
2.) Build a cushion into your budget that will continue to grow each year. While these funds increase in value, invest the cash with a time horizon around the season of the year when a potential disaster is most likely to occur in your region.
3.) Prepare a plan with your financial institutions and share it with them early on. Your entity needs to have easy access to cash and be able to borrow if the need is greater than expected. These sudden needs could be for emergency services, overtime payroll, vendor payments for supplies, temporary housing, cash for incidentals, etc.
4.) Keep your cash working and plan accordingly. All too often, cash is left on the sidelines for “just-in-case” circumstances, sitting there and earning nothing. Such a lost opportunity will mean less money that can be built up as your emergency backup.
5.) If no emergency occurs, great. But don’t let your guard down. As you see the level of cash you’d set aside build, it’s tempting to use it for other purposes. Bad idea. Your “just-in-case” money should remain sacred and earmarked strictly for emergency purposes.
At threeplusone, we can help your entity be better prepared for natural and human-caused disasters. Our liquidity analyses and modeling algorithms factor in the stress level a public entity or higher Ed institution can withstand. Our systems foresee unexpected cash needs and strains and can prepare entities to handle them well in advance.
The time to plan in making money available for a state of emergency is not during the emergency, but well ahead of it. Take a proactive approach and you’ll eliminate the fear of not having enough available cash and be able to calmly handle any state of disruption.
Federal Reserve Chairman Jay Powell has made it clear: short-term interest rates will continue to rise gradually, as the Fed orchestrates a fine balance between economic growth and the threat of inflation.
This is good news for those public and higher Ed entities that have cash to invest. If you need to borrow, now is the time to do it.
If your entity is weighing the pros and cons of using cash vs. going into the marketplace to borrow for a capital project, first contact your Financial Advisor (FA). In many cases, the cost of borrowing may still be under 3.0%, while the value of cash should exceed 3.0% in 2019. As a result, the cash on hand can be put to work over the course of months and years; by yielding a higher level of interest earnings, you could offset the capital expense of borrowing.
The value of cash is only getting stronger, leading to more options of how you can put it to work.
At threeplusone, we help public and higher Ed entities evaluate both short- and long-term liquidity needs, leading to higher interest earnings with their financial institutions—and potentially lower borrowing costs. Keep in mind that our data and liquidity analyses demonstrate the value of strong cash management to rating agencies. We stress the best practices of liquidity management, focused on borrowing strategies and repayment over the life of the project.
As rates continue to move up, so can the value of your operating and non-operating cash. With its greater worth, you’ll be in a better position when you go to the market to borrow.
Whatever the case may be, those you serve will benefit from this upward trend—if your cash and borrowing strategies are proactively managed.
That’s where we can help.
Target’s CEO, Brian Cornell, stated late last month that the consumer environment in the United States has never been better, indicating that retail sales are strong and will only get stronger.
These comments are in line with those of economist James Glassman at J.P. Morgan. During a recent New York State County Treasurers Conference, Glassman was very positive on the state of the U.S. economy and the upward trend in sales tax revenue from gas and retail sales. He expects the economic growth in the U.S. will continue to be positive into 2019 and 2020.
As a result of this sustained growth in the nation’s economy, a parallel growth in public operating funds is very likely. We expect the vast majority of public entities across the country will have more cash on hand this year than they did in 2017. This is the same trend that entities experienced in 2016 and 2017 compared to previous years—but at a higher percentage level.
With more cash on hand, the greater is the need to manage that cash proactively—especially as higher short-term rates lead to even higher operating reserves going forward.
This is very exciting news.
Taking full advantage of this growth trend is paramount, especially when preparing for ongoing sustainability.
At threeplusone, we view all cash as a revenue-generating asset. We use proprietary algorithms to produce liquidity analyses that capture the time value of all cash and sync it to its marketplace value. With such data in hand, public entities have the knowledge base they need to better deal with financial providers and advisors.
The likelihood of having more cash on hand this year and next is in store for public entities across the country. It will be up to you to put that extra cash to work on behalf of those you serve.