Preparing for the next fiscal year is always top of mind. Predictable patterns coupled with the “unexpected” are always a challenge. Tax caps and other restraints hamper your ability to plan, long before your plan is made public.
As a result, more than ever, you need to prepare a detailed cash flow forecast that incorporates the constants—anticipated revenues, payroll, benefits, vendor, capital outlays, etc.—while still planning for potential surprises.
One source of revenue that has dried up over the last several years has been income earned from your bank deposit accounts.
Two months ago, I attended a state Government Finance Officers Association (GFOA) conference in which the number one question to bankers was: “Can you pay me more on my deposits?”
Given recent economic reports and a presidential election, I do not expect more than one or two rate hikes for the remainder of this year. Even if there is a 25 to 50 basis-point rise, deposit rates increases will be minimal given the risk and compliance overhead costs and/or liquidity requirements resulting from recent federal regulations.
So what should you expect in 2017 for deposit and/or interest revenue? Little to nothing?
For entities that do not proactively manage their deposit or banking relationships, deposit revenues will stay at the same rate as 2016.
Those entities that are being more proactive—with tier liquidity management and sound banking relationships—can expect a 30 to 50 basis-point increase in deposit revenues, which could result in tens or hundreds of thousands of dollars in new income.
My advice is simple: perform a liquidity analysis on your entity’s operating and non-operating funds. With a comprehensive 360-degree analysis (including cash flow and the marketplace perspective) you can uncover and quantify low or non-performing dollars and use them to negotiate with your current or future financial providers.
At three+one, our cashVest service provides proprietary reports and data that can be used internally—and externally with your banks and/or RIA—to achieve higher revenue on your deposits while keeping regulations, safety, and liquidity top of mind.