Do you ever enter your office to face a wall of anxiety and worry that results in unexpected stress, triggered by questions like:
How are we going to balance our budget with unexpected costs?
Are we fraudproof?
Are we getting the best rates?
Are we prepared for the annual audit?
Do we get the most out of our banking relationships?
Do we have strong liquidity just in case?
How will the public and press react?
Where can we save more money?
Where do we find new sources of revenue?
How do we handle all this work with less staff?
These are just a few of the worries that go through one’s mind in a finance office that create anxiety and lead to stress – not an uncommon occurrence for those serving public entities or higher Ed institutions, especially given the lack of resources, budget pressures, and ever-increasing expectations of accountability by those they serve.
There are some stresses that can be alleviated, however, allowing one to perform more finance functions that can actually lead to new sources of revenue.
Here are five ways to ease stresses on your staff and yourself:
1) Look to outside partners who can fill voids. Bring in additional expertise. View vendors not as an expense, but rather as cost saver or revenue-center provider. This should not be seen as a weakness but rather a strength and a confidence builder in driving results, efficiencies, and cost savings or new revenue initiatives.
2) Drive for greater technology, allowing enhanced productivity and filling in for lower staff levels.
3) Conduct weekly team meetings to provide transparency and allow feedback. The more involved all team members are in decision-making and projects, the greater their productivity and positive attitude.
4) Treat the public as customers by caring, listening, and striving to solve their problems. When a taxpayer walks to the counter, a positive response to your assistance will result in a positive outcome, even if a problem could not be entirely solved. Caring goes a long way and the level of tension does not escalate. A terse exchange can make everyone’s day stressful. Statistically, one bad experience will be passed on to 25 other people, which causes major reputation risk.
5) When vendors come knocking at the door, treat them with respect. As a public official and business owner, there have been many times I have been given a cold reception without an opportunity to even introduce myself. You never know who that person may be or whom they know. A brush-off or a disinterested attitude at the front counter can easily spread throughout the office and be interpreted as an acceptable behavior that may carry over to phone calls and emails.
At three+one® our mission is to alleviate stress, create new sources of revenue for those you serve, while providing stronger bonds between you and your financial institutions. Through diagnostic liquidity analysis, three+one® is able to provide time-horizon data, allowing an entity to maximize marketplace value on all cash.
Just imagine creating a new revenue source without all the anxiety, worry, or stress. Now that’s something to celebrate with those in your office and with those you serve.
While we have seen increases in interest income since the Fed started raising (or normalizing) the Federal Funds rate since late 2017, this period of normalization has many public finance personnel searching for the right cash allocations. Between 2008 and 2015, the Fed kept rates at essentially zero, so the current environment of relentless rate movement is new and brings new opportunities, new questions, and new challenges.
Here are six ways to maximize the value on your entity’s cash no matter what the Fed does:
1. Leverage the ability to take advantage of what the yield curve has to offer today. Count on what can be counted. If you play the market, you risk making an inaccurate move. Counting on data and the opportunities the market holds today preserves interest income. For example, identify the time-horizon opportunities on every dollar deposited at each of your banks. Once those durations have been time tested, take advantage of the time-deposit and fixed-income opportunities available to you in order to preserve interest income no matter what the Fed does.
2. Know what cash you need to be liquid but, more importantly, know what cash you don’t need to be liquid. Liquidity is a vital part of public-financial management, but keeping all funds in a demand-deposit account, money-market fund, or the like, can prevent the public from realizing the benefits liquidity data can bring in interest for the next five years. Many remember what happened in 2008 when the Fed lowered rates and the value on cash that had been kept with 100% liquidity dwindled to nil.
3. Know your options and understand where you fall with your peers. Depending on your state’s laws, you could have many options: deposit placements (ICS, CDARS, etc.), fixed income, cooperative investments, CDs, money funds, and more. One opportunity does not fit all. Knowing how your entity’s cash performance stacks up against your peers is invaluable to knowing that you are creating additional value off the value the public creates through tax dollars.
4. Do not separate a cash-management (treasury-services) plan from an “investment plan.” In 2019, your entity’s investment plan and treasury-management plan should be heavily integrated, even more so as rates fluctuate. This will differ depending on your bank, your budget size, the time horizon of your cash, and the availability of your staff.
5. Maximize the value of your banking relationships. Understand the benefits your entity’s cash provides to your banks, your investment managers, etc. Even in a plateauing rate environment, your cash has considerable value!
6. Don’t be afraid to ask for help! Considering all the responsibilities public servants have to juggle, it’s impossible for them to undertake every accounting, financing, budgeting, treasury, and human-resources challenge by themselves. It is also not always possible to add additional personnel to lessen the burden on yourself or your current staff. Bring your staff together and have a frank conversation about what is possible to undertake, what is not, and what outside experts you can bring in to help.
Lastly, if you have questions on any of these points, please reach out to the team at three+one®. We’re here to help—and always welcome hearing your questions and concerns.
In preparing a balanced budget, the first option in making ends meet should be finding new sources of revenue before considering an increase in taxes. And, yet, raising taxes is almost a spontaneous reaction any time a budget gap is discovered – or even suspected.
At three+one®, we believe tax increases should only be levied as a last resort, not as the starting point.
Before a tax increase is even considered, can you, as a conscientious public official, say unequivocally that you’ve implemented every source of cost savings or new avenues of untapped revenue?
I estimate that nationally at least $500 billion of public cash is underperforming at marketplace rates. These dollars are either being kept on the sidelines for “just-in-case” expenditures or being left dormant since cash is considered to be a low-value asset. In many cases, this cash is being left in bank accounts with such little attention it may as well be invisible.
Just consider if the average yield on a public deposit was 2.0%. On a national basis, that equates to over $10 billion in new revenue for public entities. Let me repeat that: $10 billion per year of new revenue.
The revenue an entity can earn on all cash is no small amount. It’s generally enough to cover budget gaps, offset tax increases, or even enable offering tax rebates. I could go on and on. cashvest® by three+one® provides liquidity analysis and time horizon data that identifies and allows an entity to capture the full marketplace value on “all” cash.
Bear this in mind: the money public entities handle is not really their money; it belongs to the taxpayers.
Realizing the value of all cash is the first option one should consider before an entity even considers raising taxes.
Let cashvest® by three+one® help you put your cash to work.
Are you looking for a way to alleviate escalating expenses, cut out miscellaneous fines/taxes for your taxpayers, or close a budget gap—but can’t seem to find a solution? CFO Sarah Sullivan and her team at the Richland Library in South Carolina have experienced similar issues. After working closely with three+one® over the last couple of years, developing and implementing a clear liquidity plan, the library has increased its interest earnings by over 150%. This has enabled the library to solve some serious financial challenges.
With Sarah’s proactive approach, and by incorporating three+one®’s time horizon and treasury data, the library will completely eliminate all overdue fines this upcoming fiscal year. The library is able to go fine free and put their mission first by encouraging current and past customers to use the resources, services and programs that they offer—without the fear of fines.
With Sarah and her team’s hard work and dedication to increasing interest earnings over the last year, the library recorded over $208,000 in interest earnings (net of fees) and has the potential to exceed $260,000 (net of fees) over the next 12 months. Here are a few ways the library has achieved record interest earnings:
• By ensuring 100% of all the library’s funds are providing value, either through direct interest earnings or by offsetting banking fees.
• By continuing to work on balancing the library’s operating balances and using three+one®’s time horizon data as cash flows change to ensure all low- and non-performing cash receive the maximum rate potential.
• By utilizing three+one®’s liquidity data to identify solutions within their current banking relationship for short-term funds. Doing so ultimately resulted in 50% of their annual earnings.
We’re thrilled for Sarah Sullivan and her team and are pleased to share the Richland Library’s success story.
Now let three+one® help put all your entity’s cash to work, finding solutions for potential budget shortfalls, lowering tax burdens on constituents, and so much more.