Confidence in the Data

Confidence in the Data

It’s already happening! Banks and advisors are setting expectations with clients for more upcoming rate cuts by the Federal Reserve. These will lead to lower deposit rates and yields on short-term cash for next year.

As mentioned in prior blogs, you shouldn’t fall into the trap that lower interest rates mean that the value of cash cannot be a valuable revenue-generating asset. 

three+one Banking Consumer Rates

The right data will enable you to plan on making more interest income next year.

A number of public and higher-Ed institutions keep more cash than necessary on the sidelines, so liquid that the cash becomes dormant. Doing so leads to a lost opportunity in creating or preserving interest income.

There are three steps you should take to make more interest income on your cash, even in a declining interest-rate environment.

First, have a liquidity analysis performed by three+one®. Keep in mind that a liquidity analysis is far different from a cash flow analysis. Looking at all financial transactions from an entity’s perspective—and comparing each transaction that flows through its financial institutions—will lead to valuable data for all parties involved. The more information you have when you actually need cash, not just when you think you need it, will create a level of confidence as you seek to put all cash to work.

Second, the time horizon of short-term cash will allow you to understand the value of cash in the marketplace. All cash has value, whether for a day or for two or more years. Having the confidence to make the decision is a matter of having the necessary information at hand. Our proprietary cashvest® platform can provide you with all the data you need to manage your cash, while also providing a road map to your financial institutions, with sound advice in the management of deposits or investments.

Third, trust the data. While short-term interest rates may rise or fall, the ability to leverage the time value of your cash will allow you to capture or preserve interest income on all cash. In doing so, you should have confidence in what the data is telling you. The ability to have accurate information at your fingertips will allow you to make timely investment decisions with your financial institutions, while always having access to cash when it is needed.

This is the time to start preparing for next year. Let our cashvest® platform provide you with the accurate liquidity data necessary to put all of your cash to work. You’ll be taking advantage of the time value of all cash and preserving your interest income.

Having the right data will enable you to instruct your financial institutions on the steps you plan to take to make more interest income next year. That’s better than having them tell you to expect lower-interest earnings.

cashvest® by three+one® is here to help you demonstrate that kind of confidence.

Budgeting Interest Income for 2020

Budgeting Interest Income for 2020

It is my expectation that average earnings on short-term cash in 2020 will range between 1.50% to 2.00%.

With short-term rates currently hovering just above 2.0% and recent indications by the Federal Reserve to lower short-term rates, one would expect lower budget interest earning projections for 2020.  However, that doesn’t need to be the case.

2020 Budget Cycle

Municipal public entity and higher-ed budgeting of interest income for 2020 fiscal year is critically important.

A majority of public and higher Ed institutions continue to keep many levels of cash on the sidelines for “just-in-case” circumstances. For them, that means leaving sizable balances in low interest-bearing accounts.

Here are three steps you can take now to preserve and increase your interest income earnings for next year:

1. Perform a liquidity analysis around all your cash. This is far different from a cash-flow analysis. A liquidity analysis not only looks at the ebbs and flows of a month’s highs and lows of cash, but also includes the float of every dollar as it relates to actual daily transactions that occur all across your entity and your financial institutions . By monitoring your liquidity, the ability to pay your bills while also investing all other cash will allow you to maximize the value of all of your dollars, not just some of them.

2. Be aware that the valueof cash in the marketplace depends on the amount of time you have on your cash. Currently, money invested for 30 days is receiving higher rates than that invested for 90 days or longer. However, this can change, so having an active dialogue with your financial providers to establish an investment strategy is important. In the past eight months, there have been a couple of times we’ve seen 12-month rates jump up; they allowed those who paid attention to lock in higher rates. For your bank or investment advisor to take advantage of such opportunities relies on your ready response, always knowing what monies can be put to work, and the necessary approval processes are in place to implement upon their specific recommendations.

3. Remember that this is also good time to keep an open dialogue with your banker(s). Proactive involvement with your bank(s) will help you strategize against any reactive rate moves the bank could make in a changing rate environment.

If you don’t where to start – or don’t have the time or resources – let the team at three+one® help. With the support of our proprietary liquidity analysis and data, we can gauge critical time horizon on all your cash. That will enable you to capture the highest marketplace value for your cash and help preserve and increase your income this year and all next year.

Though it appears that rates will be slightly lower for the next budget year, that doesn’t mean you have to lower your interest-earnings outlook. It just means you need to know what tools are out there to help you make the most of  your cash on hand.

Your 2020 budget can reflect an increase in interest earnings through a proactive management style and the liquidity data of three+one®.

Prepare for Change

Prepare for Change

At recent GFOA conference, we surveyed attendees and discovered a startling disparity in the experience levels among municipal officers as 25% were comparatively new to their positions. With 50% of finance officials now age 55 or older, preparing for your entity’s leadership depth is essential.
 
In the near future the largest group of public finance officials will be new to their office. Today’s vlog introduces 5 key strategies to prepare you & your office for those changing demographics.
Anxiety + Worry = Stress

Anxiety + Worry = Stress

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?

three+one Finance Liquidity AnalysisThese 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. 

Providing Solutions

Providing Solutions

At our core, three+one® is a liquidity analytics, data & tech company, and what better way to demonstrate our savvy in FinTech than to communicate with you using new media tools like vlogs? Informing the national marketplace about the value of time-horizon data and liquidity analysis will be better visualized using this new format. At three+one® we are changing the conversation on financial responsibility with this exciting new enterprise!
 
Introducing the first in an ongoing monthly series, join us for a conversation as Garrett Macdonald vlogs about the necessity of solutions-based approaches in turning your cash into your most powerful asset.
Fed Rates & the Public’s Cash

Fed Rates & the Public’s Cash

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.

colorful money

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.