1 april 23, 2005 managing cash using treasury management tools presented by: erin reardon cohn...
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April 23, 2005
Managing Cash Using Treasury Management Tools
Presented by:
Erin Reardon Cohn
LaSalle Bank
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AgendaAgenda
What is Treasury Management?
Why is Treasury Management Important?
How Does Treasury Management Work?
Case Study 1
Cash Conversion Cycle
Collections
Disbursements
Electronic Banking/CP Web Demo
E-Commerce
Global Treasury Management
Recent Legislation: Check 21
Conclusion
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Cash Management is the management of the inflows and outflows of cash. It has the following objectives: Maintain Liquidity
Optimize Cash Resources
Finance Capital Needs
Manage Risk
Coordinate Financial Functions
What is Treasury Management?What is Treasury Management?
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What is Treasury What is Treasury Management?Management?
TREASURY MANAGEMENT
Speed up cash inflow
Slow down cash outflow
Why is Treasury Management Why is Treasury Management Important?Important?
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What can happen if an entrepreneurial firm does not properly manage its cash?
Why is Treasury Management Why is Treasury Management Important?Important?
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Case Study 1Case Study 1
Continental Glass & Mirror Co. is a young start-up company that manufactures commercial glass & mirrors
they currently collect checks in-house and drop off at the bank, they are large $ checks
they overdraw their account about twice a week and pay OD and NSF charges
they have a location in Ohio that receives cash
they don’t know what their daily balances are; sometimes they are OD and sometimes they have excess funds in their account
What cash management tools would you recommend to Continental Glass & Mirror?
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Cash Conversion CycleCash Conversion Cycle
Accounts Receivable(Collection)
Cash(Control)
Pay for goods/materials(Disbursements)
Sell goods or services
Produce goods or services for sale
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Cash Conversion Cycle and Treasury Cash Conversion Cycle and Treasury Management Management
Accounts Receivable(Collections)
LockboxOTC
Electronic PaymentsDeposit Consolidation
Cash VaultComprehensive Receivables
Cash(Control)
Online reportingForecasting
ACHWire Transfer
Sweep Investment ProductsPay for goods/materials
(Disbursements)Controlled Disbursement
ARPPositive Pay
CD ROMZBA
Stop PaymentsComprehensive Payables
Purchasing Card
EDIDocument Outsourcing
Electronic Bill Payment & Presentment
Sell goods or services
Produce goods or services for sale
Web-based Banking Platform
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Cash Conversion CycleCash Conversion Cycle
Accounts Receivable(Collections)
LockboxOTC
ElectronicDeposit Consolidation
Cash VaultComprehensive Receivables
Cash(Control)
Online reportingForecasting
ACHWire Transfer
Sweep Investment ProductsPay for goods/materials
(Disbursements)
Sell goods or services
Produce goods or services for sale
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Electronic Wires
ACH (Automated Clearing House)
EDI (Electronic Data Interchange)
Paper Wholesale Lockbox
Retail Lockbox
Invoice Generation
OTC (Over the Counter)
Vault Services
Deposit Consolidation
Comprehensive Receivables
CollectionsCollections
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Payments mailed by remitters
Wholesale Lockbox Process
Post Office sorts by unique zip code Bank picks up mail from P.O., finesorts to individual lockbox numbers,and opens the mail
Work is broken down and prioritizedaccording to pre-determined deadlines
Checks are processed per customerinstructions. Payees and dollaramounts are verif ied
Invoice information is data keyedand made available via CashPro,Transmission, Fax, and/or E-Mail
Remittance Packages areprepared and mailed out tocustomers
60674
Checks are imaged and photocopiesgenerated. Dollar amounts are re-verified,checks are encoded and delivered to ItemProcessing for clearing
Checks and documents are imagedand made available via the internet.The images are burned onto CD’sand sent to customers
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Wholesale versus Retail LockboxWholesale versus Retail Lockbox
Wholesale: •Corporate to Corporate •Small number of large dollar checks
Retail: •Consumer to Corporate •Larger number of small dollar checks•Checks come with a standard invoice/coupon
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Why use a Lockbox?
BENEFITS: Save time, save money, make money•reduces mail float: time check is in the mail•reduces processing float: time to process the check•reduces availability float: time for check to clear banking system.
All of the above accelerate the deposit’s availability so a customer can use their cash quicker.
Collections: LockboxCollections: Lockbox
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Vault Services
Deposit Consolidation Daily deposits at various locations
Night deposits
Account for every location’s deposits
Consolidation of funds into one single account
Information viewed online via CP Web
OTC - Over the Counter
Invoice Generation Printing of Invoices
Bank expertise
Other Types of CollectionsOther Types of Collections
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Comprehensive Receivables as a Comprehensive Receivables as a SolutionSolution
Product highlights include:
Supports check, ACH, and wire payments
General Ledger integration
File status information via Transmission
A receivables service that allows customers to receive a single file from the Bank to
consolidate all receivable types.
A receivables service that allows customers to receive a single file from the Bank to
consolidate all receivable types.
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Collections: Comprehensive Collections: Comprehensive ReceivablesReceivables
LOCKBOX
WIRES
EDI
ABN AMRO
A/R System
Receiver
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Cash Conversion CycleCash Conversion Cycle
Accounts Receivable(Collections)
LockboxOTC
Electronic PaymentsDeposit Consolidation
Cash VaultComprehensive Receivables
Cash(Control)
Online reporting (CashPro Web)Forecasting
ACHWire Transfer
Sweep ProductsPay for goods/materials
(Disbursements)Controlled Disbursement
ARPPositive Pay
CD ROMZBA
Stop PaymentsComprehensive Payables
Purchasing Card
Sell goods or services
Produce goods or services for sale
Electronic Banking Platform
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Funds Disbursed
• Checks
• Cash
• Wires
• ACH
• Purchasing/Corporate Cards
Disbursements – Funds OutflowsDisbursements – Funds Outflows
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Controlled Disbursement is a service which provides early morning notification of the total dollar amount of checks presented against that account each day
Information available through an Electronic Banking Platform
What is Controlled Disbursement?What is Controlled Disbursement?
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Account Reconcilement Service
Defined: A check service where the bank performs part or all of a companies reconciliation by electronically providing check paid information.
This can be done daily, weekly or monthly.
Services include:
Partial
Full
Positive Pay
Reverse Positive Pay
DisbursementsDisbursements
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Benefits:
Accelerates month end reconciliation process
Reduces cost of temp (or employee) to reconcile manually
Eliminates need to manually key in check paid data
Reduces exposure to fraud
Disbursements: Reconciliation Disbursements: Reconciliation BenefitsBenefits
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Billions lost every year, according to FBI
Positive Pay with Teller Services
Image Positive Pay
Reverse Positive Pay
ACH Block
ACH Receipt Authorization
Disbursements: Fraud Control Disbursements: Fraud Control ServicesServices
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• Full Recon Service with Fraud Prevention
• Client sends issue file day prior to checks being issued
• Bank maintains database of all issued checks
• Paid checks compared to database and any items that do not match exactly reported
Disbursements: Positive Pay ServicesDisbursements: Positive Pay Services
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Service that ties accounts together
Parent account either funds or receives funds from child account
Child account always ends day with zero
Used to consolidate funds within same bank
Zero Balance Account (ZBA)Zero Balance Account (ZBA)
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Disbursements: Purchasing/Commerical Disbursements: Purchasing/Commerical CardsCards
Commercial Cards Cards used to pay for goods/services
Eliminates petty cash
Float advantages
Stored Value Cards Pre-funded credit cards
Cash withdraws at ATM machines
Ideal for ‘unbankable’ employees
Suitable for projects
Used for budget purposes
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Cash Conversion Cycle and Treasury Cash Conversion Cycle and Treasury Management Management
Accounts Receivable(Collections)
LockboxOTC
Electronic PaymentsRetail Lockbox
Deposit ConsolidationCash Vault
Cash(Control)
Online reporting (CashPro Web)Forecasting
ACHWire Transfer
Sweep ProductsPay for goods/materials
(Disbursements)Controlled Disbursement
ARPPositive Pay
CD ROMZBA
Stop PaymentsComprehensive Payables
Purchasing Card
EDIDocument Outsourcing
Electronic Bill Payment & PresentmentWeb Payment Engine
Sell goods or services
Produce goods or services for sale
Electronic Banking Platform
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Electronic Banking:Electronic Banking:
Web-Based Treasury Management Tool
Access to: Information Reporting
Stop Payments
Imaging
Initiation of Wires/ACH
Funds Transfer
Upgrades are transparent to clients
‘Push’ Technology
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Check the status of the alert, including the date
and time of delivery
Forward messages to additional contacts
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Cash Conversion CycleCash Conversion Cycle
Accounts Receivable(Collections)
LockboxOTC
Electronic PaymentsDeposit Consolidation
Cash VaultComprehensive Receivables
Cash(Control)
Online reportingForecasting
ACHWire Transfer
Sweep ProductsPay for goods/materials
(Disbursements)Controlled Disbursement
ARPPositive Pay
CD ROMZBA
Stop PaymentsComprehensive Payables
Purchasing Card
EDIDocument Outsourcing
Electronic Bill Payment & Presentment (EIPP)
Sell goods or services
Produce goods or services for sale
Electronic Banking Platform
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Electronic Commerce Electronic Commerce
EIPPEIPP Electronic Invoice and Presentment Program
Web Presentment of Invoices
Electronic Settlement
Eliminates Printing and Distribution Costs
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Account Structures (backbone of any structure)
Collection/Disbursement accounts
Concentration accounts
Treasury account structures
Electronic Banking
Netting
Cash Pooling
International Lockbox
Bulk Payments
Global SolutionsGlobal Solutions
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The Check Clearing Act for the 21st Century
October 28, 2004
“Check 21” aims to improve check-clearing efficiency by reducing the clearing systems need to transport the original check from the point of deposit to the paying bank. Legalizes use of “substitute check”- the image of the front and back of the check.
Recent LegislationRecent Legislation
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Cash Conversion CycleCash Conversion Cycle
Accounts Receivable(Collections)
LockboxOTC
Electronic PaymentsDeposit Consolidation
Cash Vault
Cash(Control)
Online reportingForecasting
ACHWire Transfer
Sweep Investment ProductsPay for goods/materials
(Disbursements)Controlled Disbursement
ARPPositive Pay
CD ROMZBA
Stop PaymentsComprehensive Payables
Purchasing Card
EDIDocument Outsourcing
Electronic Bill Payment & Presentment (EIPP)
Sell goods or services
Produce goods or services for sale
Electronic Banking Platform
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Case Study 1Case Study 1
Continental Glass & Mirror Co. is a young start-up company that manufactures commercial glass & mirrors
they currently collect checks in-house and drop off at the bank, they are large $ checks (Lockbox – Wholesale or Retail?)
they overdraw their account about twice a week and pay OD and NSF charges (Controlled Disbursement, ZBA)
they have a location in Ohio that receives cash
they don’t know what their daily balances are; sometimes they are OD and sometimes they have excess funds in their account (Electronic Banking Platform, Daily Sweep Investments)
What cash management tools would you recommend to Continental Glass & Mirror?