Cash Flow Forecasting and Strategy Development Conference/5.29-Cash...Cash Flow Forecasting and...
Transcript of Cash Flow Forecasting and Strategy Development Conference/5.29-Cash...Cash Flow Forecasting and...
Cash Flow Forecasting and Strategy Development
VIRGINIA GOVERNMENT FINANCE OFFICERS ASSOCIATION
2014 SPRING CONFERENCE
Presented By: Richard G. Long, Jr.
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Presentation Promise
1. Practical Suggestions To Improve Interest Income
2. Interest Is Still Important/Beneficial – Even At Today’s Yields
3. Goal: Exceed Miniscule LGIP Returns
4. Add Appropriate Additional Income
5. Modest Time/Effort = Solid Value (e.g. Second Tuesday)
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Improving Investment Performance
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Why Bother? – Example #1
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Why Bother? – Example #2
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Example #2 (page 2)
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Why Bother? – Example #3
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Example #3 (page 2)
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#1 Quickest “Added Value”
• Depository Bank Account Analysis Statement
• Way Too Much Over-compensation!
• Excess Balances Accrue FDIC Assessment
– Recoupment Monthly
– Insurance and Regulation Fee
– Deposit Insurance Fee
– FDIC Insurance
• Talk to Your Banker
• Determine Adequate Level
• Arrange Hard-Interest For Extra Balances
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Defining Investment Objectives
What are the
priorities?
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What Are Your Objectives? A. Safety of Principal
• High Credit Quality
• Sufficient Liquidity
B. Feel Comfortable
C. Achieve Appropriate Return
D. Increase Projecting Ability
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Investing Public Funds:
•Keep It Safe
•Keep It Liquid
•Public Trust
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Develop an Investment Strategy
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Strategy Development
•Adopt Disciplined Approach
•Evaluate Cash Flows
•Safely Allocate Investments Beyond Overnight
•Allow Ladder Length to Flex
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Wall Street vs. Main Street
Wall Street “Liquidity” • You Can Sell At Any Time!
• Lots of Bids
• Next Day Settlement
Main Street “Liquidity” • Cash In Hand @ Full Value (In Time To Pay The Bill)
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Primarily Emphasize Safety and Liquidity
“Cash Flow Estimates Develop Appropriate
Strategy”
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How About Those Cash Flows?
•Level One – Casual Understanding
•Level Two – Reasonable Estimates
•Level Three – Mega Detail
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Everyone Has Data! – Mountain Range
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Everyone Has Data! – Rolling Hills
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Level Two - Operating Funds
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Evaluate Your Consistent Expenditures:
• Payroll • Debt Service • “Regular” A/P
Level Three – Lots of Detail!
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Identify Net Outflow Months
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Implement Strategy
•Target Some Cash Flow Dates
•Build and Maintain Ladder
•Keep Discipline
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CIP/Bond Proceeds – Three Questions
How Much?
Start Date?
Finished By?
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Design Phase With Bell Curve
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Irregular Overall Program
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Benefits of Cash Flow Analysis
Identifies Cash Flows and Periods of Shortfalls
Targets Liquidity Where Needed
Improves Interest Income
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Opportunities In Today’s Market
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Current Investment Yields
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Understand Risk/Return
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Interest Rate History – US Treasuries
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“Public Funds” Investment Rules •Understand PFIL
•Follow Policy & Strategy
•Stay Within Cash Flows
•Diversify Investing Cycle
•Analyze All Risks
•Understand What You Buy
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Presentation Promise
1. Practical Suggestions To Improve Interest Income
2. Interest Is Still Important/Beneficial – Even At Today’s Yields
3. Goal: Exceed Miniscule LGIP Returns
4. Add Appropriate Additional Income
5. Modest Time/Effort = Solid Value (e.g. Second Tuesday)
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Questions?
Richard G. Long, Jr.
Valley View Consulting, L.L.C.
2428 Carters Mill Road
Huddleston, VA 24104
(540) 297-3419
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