Sweep Accounts: The Mechanics and Maximization of Returns Is Cash Slipping Through the Cracks in You

1
Sweep Accounts The Mechanics and Maximization
of ReturnsIs Cash Slipping Through the Cracks
in Your Organization?

• Presented by
• Michael A. Gallanis, CCM, CPA
• Principal

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Is There Hidden Cash in Your Organization?

• 360 billion goes uninvested each day
• How does this happen??

3
U.S. Corporate Liquidity

• U.S. corporate operating liquidity is estimated
  at 3.6 trillion
• Of this total, active investments comprise about
  84
• Passive investments (Sweeps) represent about 6
• DDA balances represent an estimated 10

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The First Step Identifying the Cracks

• Bank Accounts
• Cash Management Process Flaws
• Late-day Receipts

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Defining Solutions

• Bank Accounts
• Structure
• Services
• Cash Management Process
• Cash positioning
• Cash concentration/collection
• Disbursement practices
• Information processing
• Late-day Receipts
• Notification/reconciliation
• Investment Practices/Instruments

6
Deciding the Correct Investment Path

• Active Investment
• Passive Investment
• Determining Factors
• Timing of information and cashflows
• Resources
• Cost/benefit

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Cash Management Timeline

Balance Reporting Opening Balances
Automated Sweep Investments
Debt Repayment
Short-term Investments
Late incoming wires/receivables
Disbursements, funding
End of Business Day
Usually done by 1000 AM
Usually done by 200 PM
Start of Business Day
Active Investments
Passive Investments
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Active Investment Instruments

• Repurchase Agreements
• Commercial Paper
• Offshore Instruments
• Bank CDs
• U.S. Government Securities
• Money Market Funds
• Tax-advantaged Instruments
• Other

9
Corporate Liquidity
The majority of corporate investment dollars are
directed towards CP and offshore instruments
Passive
Commercial Paper 1 trillion
Other Active Investments 1.3 trillion
Offshore Investments .6 trillion
Total Corporate Liquidity
3.6 trillion
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Passive Investment Instruments

• Types of Sweep Accounts
• Depository
• MMDA
• Money Market
• Money Market Mutual Funds
• Proprietary
• Third-Party Funds
• Offshore Investments
• Credit Sweeps
• Dual Sweeps
• Other

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Passive Investment Trends (Preliminary Estimates)
36 in overnight instruments
32 in Funds
32 in all other instruments
Estimated 240-260 billion
Total Corporate Liquidity
Commercial Bank DDA Sweep Assets
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Sweep Mechanics

• Same-Day vs. Next-Day Cut-Off Times
• Same-day/end-of-day
• Next-day
• Target Balances
• Tiered targets
• Dual Sweeps
• Interest Posting
• Fees
• From 50 to 450 per account/per month

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Benefits of Using Sweep Instruments

• Higher Return on Operating Cash Balances
• Liquidity
• Convenience
• Certainty
• Participation in a Larger Pool
• Access to a Broader Selection

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Conclusion/Next Steps

• Determine if cash is slipping through the
  cracks in your organization
• Identify the cracks in your cash management
  process
• Define solutions, including the best investment
  path
• Implementation

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Treasury Strategies, Inc.

• Founded in 1982
• Consults on matters related to
• Treasury Operations
• Treasury Performance
• Treasury Technology
• Payment Systems
• Liquidity Management
• Clients include users and providers of treasury
  services
• 20 consulting professionals
• Offices in Chicago and New York

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Thank You, My Time Is Up.

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Sweep Accounts The Mechanics And Maximization
Of Returns

• Presented by
• Michael A. Gallanis, CCM, CPA
• Principal