What is cash optimization

What is cash optimization and does it matter?

Traditional cash management activities include consolidating the information from various systems to identify cash flows from Account Receivable, Accounts Payable, Capex, Opex and measured against current liquidity with cash at bank or available facilities.

But too often, the process ends with cash in bank. And this is where the magic should happen.

With full automation, astute organizations can enhance yield on available cash, automate processes, meet compliance and equally important, have an ability to expand banking relationships to deliver on diversification and risk management.

What are the typical questions a CFO/Treasurer/Director should be asking?

• Where should we invest our cash?

• Which bank is paying the best interest?

• What is the credit rating of the banks we deal with?

• How much should we invest per bank?

• How long should we invest our funds for?

• Can we have access to our funds?

• What is the difference between bank deposits and money market funds?

• What happens when the investment matures?

• What is cash optimization and does it matter?

Market information

• The majority of organizations still hold approximately 55% of short-term investments in bank deposits (AFP Liquidity Report).

• By far the majority of banks do NOT publish their corporate bank rates so organizations are in the dark about market-related rates. The available rates are for retail clients and will be different for organizations.

What is the typical process

• Finance teams then either call or email each of their banks to request a quote on bank deposit (Savings, Demand or Time deposits).

• This will be repeated for each deposit that needs to be placed with banks.

• Once the banks have responded, the information will be collated and compared to the following:Are the rates within budget? Will the best rate be within limit policies?

• Once decided, the organization advises each of the banks on their decision

• In some cases, a bank reference number is provided to link the deposit, rate and client.

• The funds are transferred to the selected bank

• The information is recorded on a spreadsheet to keep updated and calculate interest

• The calendar is updated to remind when funds will mature

• For month end purposes, the interest is calculated and graphs prepared for management accounts

• When funds mature, the organization will decide on what action to take, i.e. roll over the funds or withdraw

Likwidity will automate ALL of the above processes quickly and efficiently, except any settlements or transfer of cash funds. Automated cash optimization

Our dashboard will show:

• How much additional interest earned vs other rates

• Funds allocated by bank to reflect diversification

• Funds by credit rating to illustrate risk diversification

• Funds maturity profile to show when funds are available

• Limit utilization by bank to show adherence to limit pol

Workflow

In addition, organizations will also get:

• Notification of rates offered by each bank

• Automated interest calculations

• Automated notifications of maturing deposits with option to roll over or withdraw funds

• Detailed audit trail of all transactions

• Ability to advise banks of early withdrawals

• Ability to request banks to re-price (improve) on quoted rates

Our role:

1. Likwidity is NOT a broker and is a pure software tool charged on a fixed monthly fee. So no hidden commissions or rebates and client gets the full quoted rate by their bank.

2. Likwidity does not interpose between client and bank. We are a software tool, and organizations retain full control and engagement with their own bank and relationship managers. We aim to be invisible.

3. Likwidity does not receive or have access to organization cash funds or bank accounts.

4. Think of us as a plug-in between the accounting/ERP/Treasury systems