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®.

Preparing For The Future…

Preparing For The Future…

Last month when Garrett Macdonald, Vice President of three+one®, presented at the New York GFOA Annual Conference, he asked a large sample of Public Officials the following question: “How long have you served in your current position”.  The responses were surprising to the audience.

The largest group of responders were those who have served 15 to 20 years in such positions, at 30%, while the second largest group of 26% were those who have served between 1 to 5 years.

The findings tell us that a very significant group of public finance professionals are relatively new to their position, while a smaller middle group will be tasked – and taxed – with both continued mentorship of the younger professionals and replacing the veterans who make up the biggest group.

As I blogged last year, over 50% of those who serve as financial officials today are over the age of 55.  With this being the case, the need to build bench strength for future leadership in one’s finance office is essential in order to carry on consistency and institutional knowledge.

What can one do to prepare for a smooth transition to those whom we serve in a financial leadership position?

1) It is never too early to start building bench strength within your team.  Provide a pathway of learning, essential tools, and institutional knowledge as new talent comes into your office.

2) Allow new talent to share and adopt new ideas and technology in your office as you all prepare for the future. Keep in mind that a majority of today’s taxpayers use technology to communicate and pay their bills. It is imperative to understand the future of how financial transactions will be conducted.  It will be far different in the future than how they are done today.

3) Have your new talent develop a relationship with your financial providers. Consistency of relationship and expectations provide a pathway for a smooth transition.

4) Never stop teaching, and allow your staff to pursue continuing education, including direct links to Higher Ed institutions and certificate programs.

5) Plan on developing and purchasing greater technology. Individuals entering the finance world are extremely tech savvy and will expect to have the resources to perform their jobs. They will tend to be extremely productive with the right technology and software packages.

The chasm between those public officers with many years of experience and those that are new to the positions needs to be recognized. With the proper training and resources, the pathway to continued success will occur both now and in the future.

It’s TIME

It’s TIME

Last week the Federal Reserve stated that there will be no more short-term rate hikes for the remainder of 2019. Their outlook seems to be influenced by concerns of slower economic growth both in the U.S. and worldwide.

While many may view the Federal Reserve’s recent announcement as a concern, we view it as a major opportunity. CashVest® by threeplusone® is specifically designed to transform stagnant cash holdings into a vibrant revenue- generating source for your entity.

 

It’s TIME

 

This move triggers a major strategy shift around the value of cash. Over the last two years, those who have invested cash have kept to a 30-90 day rollover strategy.

This is now the time to extend your cash through the use of cashVest® by threeplusone® and its powerful time-horizon liquidity data. Through our proprietary liquidity analysis, we can demonstrate the actual need for cash while balancing the levels of cash needs over a 5-year period. This allows one to maximize the value of all cash, while allowing your financial institutions and advisors to invest your cash over an extended period of time, allowing the ability to preserve 2.25%+ on your cash.

Cash has value. The knowledge and power to accurately identify when you most need cash allows one to capture and preserve interest earning through the remainder of 2019 and into 2020.

You have a fiduciary obligation to manage the cash for those you serve. It’s time to preserve your cash’s value in the marketplace for a longer period of time, especially if you have the time-horizon data to provide the confidence to you and your financial institutions.

Allow your public sector organization or higherEd institution to find out what so many others across the country have learned: CashVest® by threeplusone® will provide new revenue quickly and directly by increasing the yield you receive from your existing cash.

Providing Solutions vs. Product Sales

Providing Solutions vs. Product Sales

It’s Wednesday.  You feel tired, stressed, and you have a sales team waiting outside your door to pitch the latest product they have to offer.  As you meet, you see their lips move but you’re not listening because it is a product pitch not a solution to a problem or stress in the office.
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Providing Solutions vs. Product Sales

In today’s public and higher Ed marketplace, the strains on a finance office continue to grow with less resources to alleviate the stress.  Instead of just another product sale, the focus by those who serve you should be solutions-based that reduce pain points while adding value to your organization and the bottom line.

There are three steps to providing a solution to address pain:

1.) Identifying the stress. This means taking the time to listen and understand the pain points.

2.) Formulating and implementing a tailored solution.

3.) Monitoring the success of solution(s) to make certain the pain point has been alleviated.

Too many times pain points are overlooked, and a product is just thrown against the wall to see what sticks, only to create another stressor and not a solution.

At threeplusone®our mission is to understand the needs and vulnerabilities of a public or higherEd entity and provide a solution to resolve any pain points.  We listen, identify, and implement solutions that remove the source of stress to provide ease and comfort.  We are solely a solution-based provider with no self-serving products to sell.  Our interests dovetail with yours.  Through our data platforms, threeplusone®can see what others overlook and then craft unique solutions, resulting in new sources of revenue and less amounts of work and stress.

Products have a place in the public and higher Ed marketplace, but only after they have been identified as a solution to the real problem.

As a Taxpayer

As a Taxpayer

As one looks through the eyes of a taxpayer, how do you think they would react to any one of the following responses from a public official when asking about how the entity manages their public cash?

1.) Why bother? Cash has no value.

2.) I don’t have the time, given all our other priorities.

3.) All our money is already invested in our bank.

4.) I don’t want to risk not having cash when I need it.

5.) I don’t currently have the staff or resources to look into this.

6.) It’s probably not going to be worth the effort.

7.) My board won’t approve it.

8.) It’s only going to bring in another $50K to$100K. That’s not enough to really impact my bottom line.

9.) All our cash is spread among so many banks and bank accounts, it would be a giant hassle.

10.) I don’t want to upset my bank or bankers.

Just imagine if those you serve heard those responses as they open their tax bill or tuition bill.

Given the financial stresses and tight margins public and higher Ed institutions experience, the need to have a single asset sitting dormant provides little cover when asked this hard question: “Why didn’t you?”

As a Taxpayer

cashVest® by threeplusone® is our proprietary liquidity analysis service that helps public entities take unrecognized and underappreciated cash and turn it into a revenue-generating asset.

Cash has real value in today’s marketplace—on average 2.25%. That can add up to real income in the six- or even seven-figure levels.

As a treasurer of a public authority and a trustee to a university, I truly understand the stresses on a finance staff. One more request can mean putting something else aside. However, you do not need to do this alone. The threeplusone® team can analyze all your cash, develop time-horizon patterns on it, and work alongside you in having a conversation with your bank(s). The end result: higher earnings on your cash.

Regarding private higher Ed institutions, our liquidity analysis will substantiate your Financial Accounting Standards Board (FASB) liquidity-disclosure requirement in 2019.

Join the ranks of our clients whose most common question after using cashVest® by threeplusone® for the first time is: “Why didn’t I do this sooner?”