cash_management_by_clint_meyers.ppt
TRANSCRIPT
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University of British ColumbiaCash Management
CAUBO June 2006
Clint Meyers
Assistant Treasurer
Cash Management
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Background
• Cash Desk implemented in 1993
• Portfolio balance (March 31, 2006)– Short Term $290M– Long Term $250M– USD $12M
• 571 transactions in 2005
• Total Dollar amount of transactions $2.15B
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What is UBC Treasury today?
• Guardian of Corporate Cash for Management & Investment
• Maximize Returns associated with Investments
• Risk & Insurance Manager
• Leases, mortgages, non-research agreements, off-campus properties
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What is UBC Treasury today?
• Faculty Housing, UBC Property tax collection
• Face of UBC Investment Management Trust
• Presentation will focus on the first two points
• Treasury will be synonymous with “Cash”
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Drivers changing the role of cash management
• Increased data gathering & utilization requirements
• Optimizing cash resources (just-in-time cash) • Improving productivity• Increased regulatory requirements • Greater audit and control standards e.g. SOX• Focus on risk management• Greater competition for limited product
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How do you manage your Cash information?
• Spread sheets
• Bank software
• Client Server Treasury Management System (TMS)
• Web based TMS
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Debt InvestmentsOther Financial
Instruments
12 MonthForecast
Daily CashPosition
Accounting
Receipts &Disbursements
Banks
ManualEntry
FaxConfirmation
ManualEntry
ManualEntry
ManualEntry
ManualEntry
ManualEntry
ManualEntry
ManualEntry
ManualEntry
ManualEntry
ManualEntry
FaxConfirmation
SpreadsheetsSpreadsheets
Typical treasury processSpreadsheets Spreadsheets
Spreadsheets
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Cost of Non-integrated System
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Cost of non-integrated system
• UBC found the following:– Usage is error prone & complex
• Manual data entry wastes time & leads to errors• Spreadsheets can easily get out sync• Maintenance is difficult, if not impossible
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Cost of non-integrated system
• Information can be scattered– Segregation of funds can be cumbersome– Control & audit standards are compromised– Ad hoc information request takes too long– No central cash position
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Integrated System
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Integrated Treasury Environment
Investments, FX
Long Term Debt
Short Term Debt
Accounting
Daily Cash Sheet
Long Term Cash Sheet
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What is a Treasury Management System (TMS)?
• Software solution designed to integrate cash management, trading into one consolidated repository of treasury information.– Automate manual tasks; eliminate multiple data
entry– Cash and exposure forecasting– Effective portfolio and disclosure reporting – Risk performance monitoring– Automatic creation of all by products of a single
transaction– Built in controls, segregation of duties
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Operational benefits of a treasury management solution
• Cash Management– Enhances cash forecasting capabilities– Automates multi-bank balance reporting– Provides a real-time, global cash position
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Operational benefits of a treasury management solution
• Debt/Investment– Speeds access for product availability for trading– Aggregates positions for efficient management and
reporting– Facilitates audit and control
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Operational benefits of a treasury management solution
• Risk Management– Allows auditing of investment parameters
e.g. counter party exposure– Improves decision making & “what if” analysis
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Operational benefits of a treasury management solution
• General– Increases time for value-added activities– Automates interfaces to other internal/external
systems– Facilitates timely access to accurate information &
other ad hoc reporting
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Summary of Data Sources In Current Position
ForecastRecurring
Items
CRM ForecastERP - A/P & A/R
Float
Financial Deal Flows
Models
Payments
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Efficiencies gained• Reduced morning reconciliation time from 2
1/2 hours to 1/2 hour
• Minimized excess cash/borrowings
• Extended borrowing/lending terms
• Enhanced reporting capabilities needed to disseminate information & measure performance
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Measuring performance
• Hard financial benefits
• Soft financial benefits
• Soft benefits
• Calculating an ROI for technology investments
• Barriers of an Integrated System
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Hard Financial Benefits
• Reduces Daily Balances available
• Improves the Timing of Financing Decisions
• Improves the productivity of CORE Treasury Functions
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Soft Financial Benefits
• More Accurate scheduling of Debt & Maturity• Enhanced Long Term Maturity Spreads• Avoids Sales & Related Losses
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Soft Financial Benefits cont.
• Reducing dependence of a simple Cash fore-caster
• Improving credibility within organization
• Managing your relationship with other groups in the organization
• Flexibility of utilizing a database system for manipulating data
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Other Soft Benefits
• Improved Treasury Dept Confidence
• Improved Image
• Improved Forecasting credibility
• Reduced Startup time for new employees
• Reduced number of errors in daily activity
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Barriers of an Integrated System• IT System reliance
• Specialized training of staff e.g. Crystal Reports
• Non-compatibility with Financial Management Systems
• System crashes
• High Start-up and on-going costs
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Calculating an ROI
• Increased Investment Revenue
• Redirected Costs
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Increased Investment Revenue• Reducing the daily forecast variances
= $1M * 5%
• Reduction of collected funds left in bank accounts on a daily basis (idle balances)
= $1M * 5%
• Higher investment yields due to improved timing of trading activity
= $5M * 0.5%
• In-house management of funds
= $290M * .001%
Total Net Revenue Increase of $225,000/yr
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Redirected costs
Workload on a treasury analyst reduced by 50% e.g. verifying daily bank balances
Redirected staff effort of 50% of 1FTE (@60K/year) =$30,000
Work load by Treasury Dept is cut by 30%
Redirected Costs: $30,000/yr
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Estimated Payback Period
• Conservatively 2 years
• Increased yields of approx. 10 basis points of self-managed funds
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Conclusions
• TMS does not have to be an expensive proposition
• Payback can be almost immediate
• Minimum float required to offset implementation costs - $50M