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Cash Management:
Strategic Execution for Strong Positive Cash Flow

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Background

A $180MM nonprofit with a substantial endowment wanted to review their cash management practices and banking relationships.

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Challenge

The organization had many bank accounts and lines of credit as well as low returns on significant cash balances.

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Solution

Review, recommend, and execute a cash management strategy that produced cost savings and increased returns on investment.

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Result

A strategic approach to managing cash that produced more than $7MM positive cash flow annually.

The Whole Story

A large nonprofit deprioritized its cash and banking strategy for years leading to excessive fees, avoidable interest payments, and reduced returns on investments.

We partnered with a $180MM annual revenue non-profit organization with a substantial endowment to review their cash management practices and banking relationships.  With changes in financial leadership, a new ERP adoption, and umpteen other priorities, a review of cash management and banking relationships was always pushed to the back burner leaving a significant financial opportunity on the table.  

 

Over the years, the organization’s regional operating structure drove a proliferation of bank accounts.  More recently, as a precaution, lines of credit were drawn to address uncertainty and remained outstanding.  With no carefully crafted policy, overly conservative operating reserves resulted in low returns on significant pools of cash.  And finally, negotiations with the primary commercial bank had not occurred for decades.

 

The Chief Operating Officer realized that a substantial opportunity existed, one that would certainly make a nice dent in the budget for the next fiscal year.  He partnered with Stanton Blackwell to bring our expertise in cash management and banking so that his internal resources could focus on strategic fundraising and efficiency initiatives where the team had deep experience.

Stanton Blackwell’s Role

Review, recommend and execute a cash management strategy that produced cost savings and increased returns on investment.

We brought a disciplined and proven approach to generate an immediate and substantial benefit to our client’s bottom line.  First, we documented and measured the existing cash management process capturing transaction data from all bank accounts, average daily balances, fees, and investment returns.  Next, we helped the finance team develop and test a rolling cash forecast.  With a lay of the land, we used external benchmarks to recommend a policy for operating reserves and a strategy for cash management.  After receiving executive and Board level agreement, we were ready to issue an RFP, the first in decades.

 

While banks like to emphasize relationships, at the end of the day, a bank is simply a vendor.  Banks also have a know-how advantage of the financial markets that they use to their advantage.  Stanton Blackwell has deep banking expertise enabling us to neutralize the bank’s knowledge leverage and run a tight RFP process.  We considered the potential switching costs of a new banking partner and on behalf of our client conducted tough negotiations with the existing vendor down to the last detail.

 

Results

A strategic approach to managing cash that produced more than $7MM positive cash flow annually.

A strategic approach to managing cash that produced more than $7MM positive cash flow annually.  Bank accounts were reduced from forty-five to four.  Standard operating procedures for cash management and operating reserves were adopted.  Over $10MM was released for the mission.  A 30% reduction in fees was negotiated without a switch in banking partners.  Investment policies were aligned with cash needs, reducing interest charges and opening the door for higher returns.  In all, the savings and increased income were over $7MM per year.  Finally, our operations team stepped in to ensure that implementation was smooth and complete.  While cash management is our business, it felt great to help a client with an important social mission improve its financial operations.

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Contributor: Anne Gehring
Anne Gehring is a Founding Partner of Stanton Blackwell.  Throughout her career, Anne has led teams to solve complex problems through collaboration and structured execution.  She has a passion for people development and has been a strong advocate for talent diversity since her career began over thirty years ago.

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