5 Must-Do’s to Maximize Shared Services

5 Must-Do’s to Maximize Shared Services

Across the country, local public entities find themselves in the same predicament: trying to do more with fewer resources, smaller staffs, and greater demands.

In today’s environment, these issues are virtually universal, in cities, towns, villages, and school districts within a given county—and adjacent counties.

On top of these constraints is a steady stream of unfunded federal and state mandates that public entities must implement, with ever fewer dollars to cover day-to-day overhead expenses.

It should come as no surprise that more and more entities are looking to work together to eliminate duplication of services and reduce unnecessary overhead. As a result, shared-services initiatives are gaining popularity, ranging from public works, public safety, self-insured healthcare plans, and cooperative purchasing programs.

The ability to join forces can have an immediate and beneficial financial impact. The one impediment is jurisdiction of control. Entities involved in sharing services should have a long-term perspective of outcome and address this clearly upfront—and in writing.

The need to consider or expand shared services may not be desirable, but rather an absolute necessity to survive. This is especially true for smaller entities within larger jurisdictions. In the minds of taxpayers, a proper business attitude is to be applied, rather than an emotional wrestling match over control.

Under a shared-services agreement, the concern of lost identity should not be raised; the initiative is a joint effort in providing/receiving services for the participants’ mutual benefit. In general, the initiatives should focus on saving money and/or generating revenue.

Here are 5 financial shared-service initiatives to consider: 

1. Conducting a universal banking services Request for Proposal. A banking RFP would create a large volume of buying power to use in negotiating competitive pricing on bank fees and deposit rates. A collaboration like this could include villages, towns, cities, school districts, and the county government, all at once. The end result could lead to hundreds of thousands—if not millions—of dollars in savings and or additional interest income. rfpPrep® by three+one® is the first-ever electronic banking RFP (Request for Proposal) service, entirely online and specifically designed to facilitate the bidding of banking services. Visit our rfpPrep site for more resources. 

2. County governments can be a source of purchasing the short-term paper of related entities as they come to market. As local villages, towns, and school districts issue Bond Anticipation Notes (BAN) or Tax Anticipations Notes (TAN), a county could be a bidder of such notes, as allowed by legal statutes, for investment purposes. As such, the county can be an additional bidder, helping to lead to lower rates and greater competitive pricing on cash for investment. 

3. Counties can provide additional resources and expertise through their finance offices in helping smaller local entities identify and manage their cash. It would still be expected that associated entities would control their cash, but alleviate the stress associated in identifying and investing cash. 

4. Combining technology efforts can be effective and beneficial both in financial and banking transactions, especially in the flow and protection of collections and payments. 

5. Finally, consider consolidating tax collection. In the future, all tax collections will be automated. The need to have a counter or have the control of check collection will become obsolete. Having one point of contact for tax payment and options payment can lead to major personnel and banking cost savings. 

Sharing services can be pathway to strengthening the financial well-being of all those involved. Let three+one help you in setting up and managing your shared-services initiatives.  What may seem as a major undertaking can be simplified with through our proprietary liquidity analysis and modeling capabilities.

As always, our mission is to help public entities to do more in serving their communities.

 

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®.

The Technology Edge

The Technology Edge

One of the underlining reasons for the merging of large regional banks is to provide a scale of efficiency: less duplication of risk and compliance overhead, coupled with the ability to build greater, stronger & secure sources of technology for its organization and client base.

As I mentioned a couple blogs ago, this trend of regional banks merging is only just beginning. Where will this leave the smaller Community Banks? The answer is at a real disadvantage, especially when it comes to larger institutional clients like public entities and higher Ed & healthcare organizations.

The Technology Edge

Electronic banking, fraud protection security, and near field technology conveniences – just to name a few – are already being offered by the large banks. They have either built these systems internally or partnered up with fintech companies, requiring large sums of capital investment.

Community banks work with third-party vendors in providing some level of technology support. This comes at a hefty price and can be tough to calculate when pricing product offerings, especially for banking services RFPs.

As a result, the trends I see developing over the next couple of years will be:

1) Community banks will primarily focus on retail consumer banking, being managed out of a local branch. Banking will remain local.

2) Technology will be in the forefront of large banks, including the new entities formed by merging banks.

3) Larger banks will continue to partner with fintech companies to innovate new levels of security and the transfer of funds, like blockchain.

At threeplusone®, we remain a leader in tracking the innovation of bank technology and providers. It is important to be aware of these trends and the sources of such technology, so they can be applied where necessary and incorporated into banking services RFPs.

Technology is moving at the speed of light, and the ability to stay informed is essential in making your life simpler for you and those you serve. Contact us at threeplusone® to ensure you’re capitalizing on the efficiencies and gains financial technology can bring you.

Introducing rfpPrep®

Introducing rfpPrep®

Over the last four years, we have encouraged public entities and higher Ed institutions to hold off on a banking services Request for Proposal (RFP) due to the low-interest-rate environment and the burdensome process in conducting a RFP. The value was not there, given the time required to conduct a banking RFP.
Well, that is now changing. With higher short-term-interest rates, new technology, and more banks pursuing public and higher Ed clients, the time has come to start taking advantage of the marketplace.

 

 

 

Over the last month, we have seen bank Earning Credit Rates (ECR) jump to as high as 1.90% in a competitive setting, with savings rates on cash balances north of 2.00%. All of this follows a trend that we see continuing in 2019.

In considering a bank RFP, it is essential that you have a forward-thinking document that reaches the greatest number of the banks in your marketplace. The idea of pulling one out of a drawer from a few years back, or from a neighboring entity, will not serve you well. An RFP needs to reflect your own banking needs, now and in the future. With technology changing so quickly, the ability to conduct a banking RFP is now at your fingertips.

The process to conduct a banking RFP no longer needs to be a burdensome paper-intensive process. With threeplusone’s new rfpPrep®—an online RFP process (at www.bankingrfp.com)that includes a custom-tailored threeplusone liquidity analysis—you’ll no longer have to read thousands of pages of responses. In fact, comparing banking services and pricing becomes an easy “apples to apples” exercise.

Just imagine being able to know which banks have the best services and pricing within minutes from a final bid deadline; what used to take months to perform now can take a couple of weeks.

Under this approach, your time in conducting an RFP can be cut down by 75%, while focusing on the relationship rather than figuring out comparative pricing and confusing disclaimers through reams of paper.

The time has come to determine if a banking RFP is a priority for 2019. If so, threeplusone can demonstrate the power of rfpPrep and the ease of conducting a bank RFP right at your desk.

Your time is valuable and so are your banking relationships. If it has been over five years since your last bank RFP, now might be time to consider a new one.

The results may surprise you, both in ease and in value.

Being a Good Customer

Being a Good Customer

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.

Being a Good Customer

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