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Scott Thomas, ChFC®, CAP®, CKA®, RICP®

Nonprofit Cash Mgt 2.0

Nonprofit Cash Management 2.0

Cash Management 1.0 is covering the basics of alignment of income to expenses and tracking and mapping it. Budget basics are core to all responsible businesses.

In 2.0 you have accumulated a cash nest egg with excess and now need to think about improving the return on your cash. Can you bypass the bank and go directly to government for fully back notes and bonds and do it efficiently and practically? It depends on few factors. First, are you at place where cash exceeds $1 million on regular basis and secondly, can cash “sit normally” for say a one year period without draw downs?  In August of 2018 your net yield should exceed 2%.  If you do require a few cash drawdowns and are able to replenish funds then you are excellent candidate for 2.0 cash management enhancements as well.

Going rate this month August 2018 on money markets for traditional brick and mortar banks is around .15% or 1/15 of 1%.  On cash balance $1,000,000 assume earning .15% or $1,500 total for the whole year.  Steward the cash into US Treasuries directly expect a yield of 2%+ or same $1,000,000 would yield $20,000 or more for the year. That is a difference of 1,233% and what numbers people call “significant”.

FDIC insures only the first $250,000.  What would happen to cash or savings above the $250,000 held in bank savings? According to site there were 8 bank failures in 2017. That is down significantly from 2009 140 failures and 2010 157 banks failed.  Investing into US Treasuries is back by the full faith and credit of United States government. Why would you not want to secure large cash positions on your balance sheet?

Question for you, “Why has your bank or their investment department not offered your organization this risk free opportunity?”  If they did offer it was there a tone of this will tie up your money? Or perhaps a standard fee schedule was attached and you realize the bank is making more on your money than you are making?  Maybe the transaction costs and wire fees were scary?  If you are currently utilizing US Treasuries and would like a second opinion on the fee structure and or absolute access to money options without incurring sales transaction, then call me Scott Thomas, Chartered Advisor in Philanthropy 407-644-9411 ext. 2.

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