University of British Columbia
Cash Management
CAUBO June 2006
Clint Meyers
Assistant Treasurer
Cash Management
Background
• Cash Desk implemented in 1993
• Portfolio balance (March 31, 2006)
– Short Term
– Long Term
– USD
$290M
$250M
$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
5
How do you manage your Cash
information?
• Spread sheets
• Bank software
• Client Server Treasury Management System
(TMS)
• Web based TMS
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Typical treasury process
Spreadsheets
Spreadsheets
Debt
Spreadsheets
Other Financial
Instruments
Investments
Manual
Entry
Manual
Entry
Manual
Entry
Fax
Confirmation
Fax
Confirmation
Banks
Manual
Entry
Accounting
Manual
Entry
Manual
Entry
Manual
Entry
12 Month
Forecast
Receipts &
Disbursements
Manual
Entry
Manual
Entry
Manual
Entry
Manual
Entry
Daily Cash
Position
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
Long Term Cash Sheet
Investments, FX
Accounting
Long Term Debt
Daily Cash Sheet
Short Term Debt
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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
Float Models
CRM Forecast Forecast
ERP - A/P & A/R
Recurring
Payments
Financial
Items
Deal Flows
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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 forecaster
• 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%
verifying daily bank balances
e.g.
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
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