View
287
Download
0
Category
Tags:
Preview:
Citation preview
University of British ColumbiaCash Management
CAUBO June 2006
Clint Meyers
Assistant Treasurer
Cash Management
2
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
3
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
4
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”
5
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
6
How do you manage your Cash information?
• Spread sheets
• Bank software
• Client Server Treasury Management System (TMS)
• Web based TMS
7
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
8
Cost of Non-integrated System
9
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
10
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
11
Integrated System
12
Integrated Treasury Environment
Investments, FX
Long Term Debt
Short Term Debt
Accounting
Daily Cash Sheet
Long Term Cash Sheet
13
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
14
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
15
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
16
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
17
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
18
Summary of Data Sources In Current Position
ForecastRecurring
Items
CRM ForecastERP - A/P & A/R
Float
Financial Deal Flows
Models
Payments
19
20
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
21
Measuring performance
• Hard financial benefits
• Soft financial benefits
• Soft benefits
• Calculating an ROI for technology investments
• Barriers of an Integrated System
22
Hard Financial Benefits
• Reduces Daily Balances available
• Improves the Timing of Financing Decisions
• Improves the productivity of CORE Treasury Functions
23
Soft Financial Benefits
• More Accurate scheduling of Debt & Maturity• Enhanced Long Term Maturity Spreads• Avoids Sales & Related Losses
24
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
25
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
26
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
27
Calculating an ROI
• Increased Investment Revenue
• Redirected Costs
28
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
29
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
30
Estimated Payback Period
• Conservatively 2 years
• Increased yields of approx. 10 basis points of self-managed funds
31
Conclusions
• TMS does not have to be an expensive proposition
• Payback can be almost immediate
• Minimum float required to offset implementation costs - $50M
Recommended