1. Cash Management and Banking Relationships Nicole Hackmann Director of Banking Office of Missouri State Treasurer, Clint Zweifel

2. Cash Management Defined as the systematic gathering of information about an entity’s collections, disbursements, and balances and the use of that information to manage the funds available to the entity effectively.

3. Cash Management 4 basic functions: – Deposits – Funds concentration – Disbursements – Information and Control

4. Deposits Where do your funds come from? – Physical Deposits at your contract bank – Imaged Deposits sent to your contract bank – Maturing Investments – Electronic Receipts: ACH Wire Transfer – Transfers from other entities at your contract bank – Prior Day Account Balances

5. Deposits How many of these items can you project or estimate? – Amounts deposited reported by depositor – Maturing investments from reports – Advance notice of expected electronic receipts – Transfers from other entities at your contract bank – Late receipts from the prior day, such as wire transfers

6. Funds Concentration Do you have monies in multiple accounts? Or in multiple banks? – Within the same bank, can you utilize bank products to consolidate your cash, such as zero balance accounts? – Across banks, determine what cash you don’t need at each bank and pull that money into your main account to invest. You can send ACH credit transactions from each bank, or pull the money into your main account with ACH debits originated from your main contract bank.

7. Disbursements How are your funds disbursed? – Outgoing ACH files – Outgoing wire transfers – Checks clearing the account – Bank transfers to other entities or accounts – Investment purchases

8. Disbursements How many of these items can you project or estimate? – Advance notice of outgoing ACH file totals – Outgoing wire transfers requested in advance – Estimates of check clearings based on historical information – Advance notice of bank transfers to other entities or accounts – Investment purchases with future settlement dates

9. Information and Control Cash flows tie all the pieces together to allow the entity to take advantage of investment opportunities whenever possible. Opening Account Balances + Receipts + Funds Concentrated – Disbursements = Amount Available to Invest

10. Information and Control Information is critical for effective cash management – Due dates – for both receipts and large payments Federal draws Tax payments Debt Service Large Distributions Payroll – Payment estimates for large program payments: Debt Service Payroll Distributions required by law

11. Information and Control Information collected is used for both the management of daily cash flow, as well as to create a cash flow forecast to assist the investment function with longer term planning.

12. Information and Control Identify sources of information – Historical information – Other offices within your entity – Budgets

13. Information and Control Can you control or accurately predict the timing of receipts and/or payments? – Tax due dates – Payroll schedule – Distributions to schools schedule – Contractor payments for roads schedule – Debt service payment schedules

14. Information and Control When compiling information for cash flows, start simple and expand, refining details as you go. Review unusual activity. This may indicate additional information you should compile. Talk with other parts of your organization. They may know exactly what is happening on the day you are questioning and may be able to help you predict it.

15. Cash Management Questions before we move on?

16. Banking Relationships As public entities, most of us acquire our banking relationships by competitive bid, which means the contract for banking services has a limited life. That doesn’t mean you can’t develop a relationship with your current contractor as well as potential future contractors. Keeping the current and potential contractors engaged helps keep them up-to-date on your service needs and keeps you informed of new products and services.

17. Banking Relationships Keeping your contractor engaged. – Have regular meetings (quarterly, semi-annually) – Ask questions about products and services featured in professional publications that might benefit your organization – Explain to them why a service they are offering will or won’t work for your organization – Ask them if they can assist in solving a banking related issue

18. Banking Relationships Keeping your potential contractors engaged. – Have an open door policy – meet with them upon their request – Invite potential bidders in advance of your RFP to discuss the services and ask questions about your operations – Ask them if they can assist in solving a banking related issue (keep questions generic and don’t criticize your current contractor)

19. Banking Relationships Keep the number of banking contractors manageable – Segregate services logically, or how they make sense operationally – Incorporate new services with a related service where possible

20. Banking Relationships Listen to your contractors – Research new services that might make your operations more efficient – Use their control procedures to strengthen your controls – Use their fraud prevention services, and challenge all contractors to offer similar products to protect your entity

21. Banking Relationships Remember this is a two-way street The relationship should be beneficial to both parties The Contractor: – Receives compensation for services – Gains experience and knowledge in servicing your entity

22. Banking Relationships The Public Entity – Receives contracted services from the bank – Receives the benefit of the contractor’s knowledge of similar entities – Receives the benefit of the contractor’s experience with other entities and organizations that might be applicable to yours

23. Banking Relationships Competitive Bidding Tips – Ensure your RFP or bid document details the services expected – Don’t leave out key pieces – Provide examples where possible – Request pricing in a format you designate so you can compare “apples to apples”

24. Banking Relationships Account Analysis Statements – Ensure contract pricing is correctly applied – Review service volumes for reasonableness and check against transaction volumes initiated/submitted/processed – Eliminate unused accounts and unnecessary services – Notify the contractor of errors regardless of who benefits from them

25. Questions?

26. Nicole Hackmann Director of Banking Office of Missouri State Treasurer Clint Zweifel Nicole.Hackmann@treasurer.mo.gov 573-751-9002