Savings Strategies for the Risk Adverse

“We’ve pulled the economy back from the abyss” “We’ve pulled the car from the ditch” There is no shortage of platitudes coming from Washington to suggest that the economic crisis is behind us, that financial calamity was averted and that we now seem to be back on a slow but steady path to fiscal health. While the validity of these assertions is clearly debatable, one thing for sure is that the wounds from the recession have not healed and are having a substantial impact on how Americans think about their finances.


Americans’ endurance has been extraordinarily tested and even those that believe the economy is rebounding are showing little appetite for ratcheting up the risk in their portfolios. Polls show that a majority of families are worried about their job, that pension plans may default on obligations and that Social Security may reduce benefits, debasing retirement income to levels insufficient to accommodate their future lifestyle goals. They have responded by saving more of their disposable income which would indicate that their main concern is that of liquidity; the ability to access the cash necessary to meet their expenses. That said, simply saving more, hoarding more cash in portfolios or relying on liquidating assets at sub-market prices is probably not enough.

With money market and other cash-equivalent investments expected to stay at near-zero interest rates for the foreseeable future, a creative liquidity strategy is required to balance the need for cash, security, and growth. Below are a few things to consider as an alternative to a hyper-conservative saving plan:

Staggering CD’s: With yields on cash investments below the rate of inflation, CDs with a range of maturities can let you obtain more competitive returns without tying up huge portions of your money. Converting short-term CD’s to cash is easy to fund an emergency while maintaining a higher yield on longer-term CD’s for anticipated major expense such as college tuition.

Leverage your portfolio and home equity: Most brokerage accounts allow you to borrow against the account assets by pledging the securities as collateral and can be a flexible liquidity tool by allowing your investment strategy stay in place and avoid capital gains tax on selling investments. For those fortunate enough to have equity in their homes, a Home Equity Line of Credit (HELOC) is another flexible liquidity tool. Most HELOC’s are based on the prime rate which is at a 55-year low. Additionally, the interest might very likely be tax-deductible up to $100K.

Dividend protection: For those that are a bit more adventurous, purchasing stocks from high quality, financially solid, dividend-paying companies can offer a consistent income at a rate above that of cash investments with the possibilty of capital appreciation. This is not a strategy for those wary of the market but for those individuals who are a bit less risk-adverse might find this palatable.

Despite the government’s claims, they have failed to restore public faith in the markets. Shell-shocked Americans have big concerns about where to invest to preserve their capital, minimize risk and re-gain their losses. Until they start spending, the recovery will be slow, as will job growth which will continue to fuel their fears. However, currently they are less about spending and more about saving. The above are suggestions to augment savings plans to help meet one’s financial needs whether it be an unplanned emergency or an anticipated long-term goal.

Will the Small Business Jobs Act Really Create Jobs

With the help of one lone Republican vote, Rep. Walter Jones of North Carolina, the so-called Small Business Jobs Act passed the Congress and was signed into law by President Obama on Tuesday. Despite drawing ample critics, the legislation also has support from some small-business interests and has lots of goodies, which include a $30 billion lending fund and an estimated $12 billion in tax breaks aimed at spurring hiring by small businesses.

The primary provision of the bill is a Small Business Lending Fund that will provide up to $30 billion in capital to financially sound small banks with less than $10 billion in assets to encourage them to lend money to small businesses. It makes changes to Small Business Administration loans, raising the maximum lending amount for certain types of SBA loans.


1) Extends provisions that increased SBA lending guarantee programs and fee reductions but recently expired
2) Increases the maximum loan size for SBA's 7(a), 504, and microloan programs. The 7(a) and 504 loan program maximums would increase to $5 million from $2 million and the microloans would increase to $50,000 from $35,000
3) Loans made under the SBA Express program would be temporarily increased to $1 million from $300,000 and includes a temporary allowance for small-business owners to use 504 loans to finance certain mortgages to avoid foreclosure


The secondary, but perhaps the only cogent component of the bill contains several tax-break measures, including a cell phone deduction and a family health-care deduction for the self-employed. It provides:

1) Small-business investments -- primarily those in corporations with less than $50 million in gross assets and held for more than five years, would be exempt from capital gains tax
2) The general business credit, which now can be carried back to relieve the previous year's tax liability, would be extended to a five-year carry-back
3) The bill would raise new-business expense deduction thresholds for startups from $5,000 to $20,000 in 2010 and 2011
4) Business owners would be able to write off 100% of the cost of acquiring property immediately instead of amortizing over time
5) For 2010 and 2011, Section 179 expensing will allow taxpayers to write off up to $500,000 in capital expenditures. Expenditures over that amount would phase out, up to a ceiling of $2 million and will allow taxpayers to expense up to $250,000 of the cost of qualified improvements on leased property.
6) Allows the self-employed to deduct their health insurance costs as a business expense for payroll tax purposes for 2010.


Probably the most promising of the foregoing are the expensing rules for equipment and property improvements as those expenditures tend to drive job creation. Currently, plans for capital spending are at a 35-year low


Now this legislation also has some provisions that could have some small-business owners worried. Some provisions intended to pay, or help pay, for the bill, in the form of higher Internal Revenue Service penalties, could end up biting small-business owners who are viewed by some as a group that tends to stretch federal tax rules:

1) The bill increases penalties for failure to file timely information with the IRS. Not just returns but all of the voluminous paperwork currently required and newly required under this and other bills
2) The bill increases Penalties for failure to file information returns to payees, such as 1099s and W2 forms
3) The bill increases the minimum penalty for each failure due to intentional disregard from $100 to $250
4) The bill increases penalties for failure to file returns as follows:
- First-tier penalty from $15 to $30, with the calendar-year maximum from $75,000 to $250,000.
- Second-tier penalty from $30 to $60, with the calendar-year maximum from $150,000 to $500,000.
- Third-tier penalty from $50 to $100, with the calendar-year maximum from $250,000 to $1.5 million


The provision regarding 1099 forms is a source of special concern as new reporting requirements included in the Healthcare Act may dramatically increase the number of 1099s businesses need to process beginning in 2013. This provision requires every business which spends in excess of $600 with a merchant, vendor, contractor, or supplier to issue a 1099 substantially increasing the amount of paperwork and potential penalties.

This bill also provides for a new bureaucracy purported to increase support to the Office of the U.S. Trade Representative to promote U.S. exports, creating staff positions there and at the Department of Commerce. Additionally, it increases funds to promote U.S. exporters and fund export grants available to industry associations and nonprofit organizations.

While promoting the bill, Mr. Obama stated that "this is important because small businesses produce most of the new jobs in this country," He went on to proclaim that the bill "will provide incentives to invest and create jobs for 4 million small businesses." and "It will more than double the amount some small business owners can borrow to grow their companies." Whether these claims will come to fruition is certainly up for debate. However, the administration has now realized that small business is the main engine of job creation – and that might be a good thing.

What might help is that the bill contains some good tax benefits for small business and may result in some capital investment and create a few jobs if businesses take advantage of them. Particularly, the elimination of the alternative minimum tax (AMT) limit that has been preventing businesses from taking general business credits like the R&D credit. Investing in one’s business rather than the IRS is always better. Whether it warrants the $12 billion price tag, no one knows. What we do know is that the tax incentives are temporary but the bureaucracies and government spending are permanent.

However, the popularity of the $30 billion small community business lending program is exiguous. Now that the legislation has been passed, its centerpiece provision faces one big challenge: many of the banks and businesses it is supposed to help don't want it. Less than 5% of small business owners cite a lack of financing as their main problem. Most say that the sluggish economy has chilled expansion plans and that unless demand increases, there is no reason to take on debt to expand. Additionally, many banks don’t believe that the money is worth it because it comes with too many regulatory strings and Bankers do not want to have their primary regulator also be their banking partner. The treasury will decide which banks qualify for the money and the banks that do receive it will need to pay a 5% annual dividend to the Treasury for 10% investment in the loan. There really is no appetite or demand for the program.

In any event, there is no shortage of opinions on the bill. Supporters say the bill will create untold millions of jobs, opponents say it’s simply another "bailout”. The Whitehouse would have probably gained more traction by offering something simple like a payroll tax holiday or extending the Bush era tax cuts that can be written in one page and then taking his opponents to task. This bill, however, is another voluminous spending bill whose benefits are really unclear.

At the end of the day, the tax provisions may encourage some businesses to invest and the lending program will do little or nothing. Banks don’t want to participate and businesses either don’t want loans or can’t qualify.. What we do know is that it will create more bureaucracies at the IRS and Commerce Departments and increase penalties. So, the real question is does it warrant the $42 billion estimated cost and will it overcome the uncertainty that is suppressing demand for the products and services that small businesses need to bring customers in the door and create the need to hire additional employees?

The Domino Effect of the Credit Crunch

Return on equity (ROE) refers to the relationship between a company’s profit and the shareholder’s equity and is arguably the most important metrics in measuring the company’s profitability and growth potential. The owners of businesses with a high ROE and little debt are able to withdraw cash and reinvest it to grow without large capital expenditures.

Companies that enjoy a favorable ROE have generally achieved this position through effective cash management which undoubtedly relies heavily upon vendor financing (open account terms) which ideally allows them to sell their merchandise before they have to pay their suppliers. This enables them to carry and, therefore, sell far more inventory than they could have otherwise which in turn creates more jobs and produces more profit for the owners.

Although these companies may have little or no debt, their suppliers generally rely on a bank line of credit to stabilize fluctuations in their cash flow. If they did not have this borrowing power, they would be unable to offer terms. Consequently, by making credit unavailable, the company would need to pay the supplier cash upfront seriously expanding their cash gap.

This lack of vendor financing requires the company to infuse a lot of cash into the business for inventory and supplies that could be invested elsewhere. The obvious choice is to reduce inventory on the shelves which reduces the customers’ selection and consequently, sales. This results in the need to cut fixed expenses to maintain profitability so the logical choice is Payroll. This, in turn creates less tax revenue to Federal, State and Local governments, less consumer spending, etc. etc.

So even if you have done everything right; you pay your bills on time, own your building, limited your borrowing, have a healthy savings account and ample inventory, a chain is only as strong as it’s weakest link. At the end of the day, the credit crunch hurts everyone as it takes necessary capital out of the system. Until borrowing becomes more accessible, even those who are debt-free will be adversely impacted. The most well-run businesses can still fall victim to external forces unless they have instituted an adaptable cash management system.

Outsourcing: Where Automation Meets Innovation

Whether it's funding daily operations, acquisitions, reducing debt or investing, the core objective of the corporate treasury function is to make the best use of incoming cash. This involves assiduous analyzing and managing of collections, payments and concentration structures.

For companies that operate globally, centralized, cash concentration is even more crucial to ensure the efficient transferring of cash among operating units, bank accounts, and funneling funds into master accounts to ensure maximum monetary productivity. Treasurers who have a solid concentration strategy find that they enjoy reduced idle cash balances, reduced costs, improved banking relationships and enhanced ROI.

The first step is to know what the objective is and what needs improving. To ensure that funds are effectively mobilized and directed, treasury professionals must take a comprehensive approach to their concentration strategy which requires a thorough examination and understanding of the company’s infrastructure. This includes visibility and accessibility to the AP and AR processes, the Legal and Tax structures and M&A activity. Further, the appropriate quality and quantity of banks and bank accounts are essential to achieving optimum efficiency of any cash concentration system.

Technology is a key element in the development of synergistic treasury and cash management which is why bank technology has been driven by demand for enhanced functionality in the execution and reporting of transactions. Treasurers have made hefty investments in treasury management systems with flexible banking platforms that provide holistic solutions that will integrate seamlessly with their ERP systems providing straight-through processing and enhanced data and analytics.

Many companies have responded to the financial crisis by across-the-board cuts without considering the long-term impact of these cuts. We have found that as restrictions continue to grow on money and internal resources, our clients are looking for projects that require limited capital outlay and offer quick efficiency paybacks. Some clients are looking to us to take over the entire process. Others have a very specific project that they want integrated to enhance their current system. Whether the project is designing a cash forecasting model, implementing a global cash management network, automating payments or managing short-term investments, the first point of order is to gather all the critical players at the onset and map out a comprehensive strategy that addresses everyone's needs and concerns.

Though treasury workstations and other treasury management systems can cost $1 million or more, it is quite possible to implement a system for as little as $25,000 or even less depending on what is required. Price is not the key. Expertise and automation are. We've found with our clients that those who electronify 60% or more of their payables and receivables cut their processing costs (checks, invoices, postage, manpower, etc,) by 50% or more. In addition, treasury departments that have implemented commercial cards or single-user accounts into the A/P transaction flow have experienced much better controls, improved reconciliation and attractive financial returns.

It is important to engage a knowledgeable treasury consulting company like TreasuryMasters that can provide practical, realistic solutions that meet their client's unique requirements. Next, choose a bank that will partner with their client by providing products that automate the operations. Banks that offer a treasury workstation as an augmentation to their online portal can be more cost effective. At the end of the day, now more than ever, companies need to leverage the experience of extraneous professionals that will add value by adopting enhancements to cut costs, improve working capital and provide access to off balance sheet liquidity

Bullish on Bonds

Just two days after Economist Jeremy Siegel and Wisdom Tree research director Jeremy Schwartz said that there's a bubble brewing in the bond market that will cost investors dearly, Morgan Stanley, the most bearish among government securities traders, acknowledged that its forecast that Treasury yields would rise this year was misguided.

“We got our rates call wrong and missed a great opportunity to be long on bonds this year,” said James Caron, head of U.S. interest-rate strategy at Morgan Stanley in a note to clients yesterday. “The market is currently rife with tactical relative value opportunities and that’s what we will focus on going forward.”

Warning of continued weakening in the economy, the Fed recently announced its plan to buy additional long-term Treasurys which would indicate a more aggressive policy. As expected, they also kept the fed funds rate near 0%. This is the central bank’s primary weapon to stimulate the economy by spurring spending and has not been hiked since December 2008

We are still reeling from the collapse of the credit and housing bubbles. US banks have written down about $1 trillion of bad mortgages while failing to write adequate new loans. This has seriously hurt small businesses who rely heavily on bank credit. Banks have found that buying Treasuries with their free government money makes more sense than lending it out to small businesses and individuals. With unemployent hoovering near 10% and the real estate and industrial markets weak, the deflationary pressures in the economy are so great that it is doubtful the Fed will start raising interest rates anytime soon barring some catestrophic event.

Now, it’s no secret that the responsibility for a huge amount of private-sector debt has been transferred to the taxpayers and will ultimately need to be paid. However, at this point, short of a massive selloff of bonds by foreign investors, the inability to auction off Treasury-bonds by the Fed or macroeconomic conditions starting to show some significant signs of improvement, a precipitous hike in interest rates and and a large capital loss in bonds is unlikely in the near term

Surviving the Credit Crunch Through Self-financing

Since the beginning of the economic crisis, liquidity has taken on an importance that outweighs earnings or growth. Consequently, treasurers have increased their focus on optimizing working capital and enhancing liquidity that has been trapped within their cash conversion cycles. Accordingly, the corporate perception of liquidity and risk has been revamped and treasurers are now seeking more diversity for their short-term cash flow.

As access to capital markets has dried up and bank financing becomes scarce and expensive, many treasurers have turned to self-financing to reduce their reliance on external funding. This requires treasurers to more actively manage working capital through vendor and supply chain financing, liquidity management solutions, improved cash flow forecasting and refinancing. The primary objectives for enhancing these areas is to improve process efficiency and reduce the risk of error and fraud. Therefore, optimizing operational and financial efficiency are among the primary objectives for corporate treasurers as any enhancement within these areas is likely to result in both financial advantage and process efficiency, and also mitigate the risk of error and fraud.

To be successful, treasurers must get key financial players and business partners onboard. Establishing a partnership with internal business units and adopting a single banking relationship will establish better banking communications improving terms and visibility over cash, payments, collections and daily cash management.

Once the internal cash gap has been diminished through better use of financial resources, the right banking partner will be able to streamline the sweep process and provide more secure, diversified and liquid investment vehicles for a company’s short-term cash flow

Companies hoard cash, reduce spending, keeping job growth on hold

Today starts earnings season with Alcoa being the first to report after the close of the market. Though Analysts have been revising their estimates downward for the past month, they are expected to report a profit for the year. They are also one of the many companies that have been hoarding cash. In fact, Charles McLane, their CFO, has said, “they'd have to beat me over my head to get it out of my hands,"

It’s pretty widely known that companies are stashing cash to the tune of about $1.8 trillion. What doesn’t seem to be so widely known, or at least not widely agreed to, is the reason why. Some of the reasons that I have heard are that they are holding back to thwart the economic recovery hoping that Obama will be seen as "failing" in the eyes of the electorate or that egomaniac CEOs want the cash for new jets and mistresses or, the more cogitative reason, “they’re greedy.”

With all due deference to these sagacious perspectives, I believe the build up in cash supplies are simply a reaction to the financial crisis where companies couldn't raise cash or had to pay much higher rates for it. They have an uncertainty about the tax and regulatory environment and it’s effect on business going forward.

The three major concerns of business are:
1) Increased regulation & Fees
2) Increased taxes
3) Unavailability and increased cost of credit

Contrary to what some pundits have said, the proposed financial regulations do not only affect financial institutions, they impact everyone that relies on borrowing to satisfy their capital requirements. We have all heard politicians criticizing banks for not providing credit only to see those same politicians propose regulations and fees which basically tell the banks not to lend and consequently sends the message to businesses not to spend or hire but rather, hoard cash. Moreover, the proposed regulations are not limited to financial institutions. Looming Environmental and Healthcare regulations and fees also threaten profits and scare the begeezes out of corporate America

With the Bush tax cuts set to expire and no reprieve expected, after-tax income will necessarily erode. Less disposable income will likely stifle already weak sales, delayed spending will provide a better tax benefit later and higher tax on dividends and capital gains will likely reduce shareholder investment and make it more difficult for companies to raise money in the bond markets or even issue short-term debt.

Debt service is one of the largest expenses of corporate America. Especially small businesses which frequently use personal credit to finance business needs.The corporate cash stash looks less impressive when compared to its debt. This High debt makes companies nervous about depleting cash or spending more of their profits. As Treasurers look at impending inflation and the accompanying interest hikes as well as uncertainty that banks will be there should they run short of cash, they will continue to hold onto their funds.

Increased cash saving is normal in an early recovery period when profits are rebounding but is not translating into investment in the economy. At this point, despite the rhetoric, businesses are going to sit on the sidelines until they are confident that the rules of the game are not fixed against them. With companies spending and investing less, economic growth is slowed. However, as the economy improves, these cash reserves give them Treasurers more freedom and comfort to start hiring and spending

Treasury Consultants Uncover Hidden Treasure: Profit

The definition of Treasury is “a place in which treasure is kept.” It can also be a place where treasure is hidden. In the case of the corporate treasury department, that hidden treasurer is profit. To uncover that treasure, you need an experienced treasure hunter; the professional Treasury Consultant.

In today's challenging economy, a dollar saved in a company's treasury function is no less important than a dollar earned from revenue. Moreover, treasury savings are sometimes more expedient.

Many CFO’s may not have the expertise, or the time, to identify all of the potential savings that can be generated by sound cash management. In either event, finance executives should consider hiring outside cash management consultants to help enhance their bottom line. An outside consultant may be quite advantageous in a situation where the treasury department is impaired by inefficiencies due to a lack of expertise or simply understaffed.

If your company’s cash management operation has not been reviewed for awhile, your treasury staff is inexperienced, you lack the budget to add full-time staff, your business has outgrown your current treasury department or you don’t have a bona fide treasury department, you should seriously consider engaging a treasury management consultant. The consultant will be able to focus on the most efficient system to administer your company’s cash.

Once you have identified the need and made the decision to hire a treasury consultant, you need to interview several consultants to determine what services they offer and how they can best meet your needs. During the interview process you should ask the candidates how they would structure your treasury operation. The consultant should be able to exhibit a successful track-record of engagements in implementing and/or streamlining the following operations:

• Accounts Receivable (Collections)
• Accounts Payable
• Daily Cash Positioning and Forecasting
• Banking Services & Products
• Lockbox Facilities
• Automated clearinghouse and electronic data interchange.

The consultant should explain how they would streamline these activities, automate where feasible, improve work flows and procedures and address the cost of banking services to achieve the best service for the best price. They should also be able to illustrate how they have been able to uncover problem areas and recommend practical solutions, At this point, you should be able to determine the scope of the consultant’s involvement and how effectively they will interact with senior executives and other key personnel. Though important, don’t get preoccupied with price. The expert consultant will be able to uncover savings far exceeding their fee. Accordingly, they know what they are worth and expect to be compensated accordingly.

Once you have narrowed your search down to 3 to 5 finalists, send to them a Request for Proposal (RFP) outlining the scope of the project. Their proposal should include the plan, methodology, timetable, fees and references. The RFP must have a deadline for responding with the proposal. Once the proposals are received, you must do your due diligence by calling each reference to determine the consultant’s quality of work, knowledge, interaction with different levels of management, cost benefit, whether the project was completed on time and whether the consultant would be retained again. You may now select the best consultant and begin the project

Cash management consultants are able to provide significant bottom line savings. Many companies fail to provide the required resources to their treasury department due to time restraints, budgetary priorities or a misunderstanding as to the importance of the treasury function. As interest rates rise and inefficiencies coalesce, inadequate cash flow due to inexperienced management of your treasury function becomes more and more expensive

www.treasurymasters.com

The Early-Pay Discount Facade

Simply put, a cash gap is created when cash inflows don’t keep pace with, or stay ahead, of cash outflows. In an effort to prevent an adverse cash gap situation, many businesses will attempt to entice early payments from their customers by offering what is known as an early-pay discount. Conversely, many savvy customers will offer to pay early in exchange for a discount. Don’t get suckered into this machination. It’s nothing but a way to obtain favorable pricing by equating the cost of product with the cost of money.

There are two primary arguments against giving an early-pay discount:

The first reason is cost: Let’s say for example that your standard terms are Net 30 days. Your customer offers to pay you in 15 days for a 2% discount. Basically, they are offering to increase your cash flow by 15 days and you will pay them 2% for that 15 days. Even if they pay on time, that’s an APR of around 48% based on the average funds employed. Sure, the more money you have in hand, the less you need to borrow. However, at those rates, you might as well go to Bobby Bacala

The second reason is Compliance: The fact is that very few customers actually pay within the discount period. In fact, most companies cannot even process invoices fast enough. Nontheless, they take the discount. They have now eroded your margins, and by extension your bottom line, and you have gained little or no working capital in return. In addition, you now need to expend administrative costs attempting to collect the shortage or deciding to write it off.

Companies want their money, and getting paid timely is imperative to a healthy business. That said, the best way to encourage timely payment is to offer a good product at a competitive price to stable customers. Simple. Right? Not really but it’s better than trying to buy customer performance..

The best way to avoid a cash gap issue is to establish sound policies:

First: Don’t sell to companies that don’t pay. Establish a sound credit policy. When you sell on credit, you are giving that customer a company asset and trusting them to pay for it. Do your due diligence. Make sure that that they have the stability, ability and willingness to pay.

Second: Don’t give customers any reason not to pay: Billing errors, shipping errors, invoices mailed late or not at all, etc. are all invitations to your customers to delay payment. Make sure that your billing and shipping departments are double-checking their work.

Third: Establish payment terms that are consistent with your Accounts Payable requirements. If you pay your bills in 30 days, your terms should be 30 days.

Fourth: Establish a tenacious collection policy: Once you have established your terms, they must be enforced. Customers pay beyond terms for a myriad of reasons. It is essential that you educate your customers on your expectations and the consequences if they are not met. Close follow-up of receivables and some “Dialing for Dollars” when needed will, in most cases, keep the payments coming in on time. You should also talk with your banker about establishing lockboxes and electronic payment systems to minimize the float and mail delays.

Most companies need to borrow money from time to time in order to bridge the cash gap. However, you should never pay 48% for the loan…..or even 24% given today’s cheap money. If you have a working capital line of credit, use it wisely but use it first. If not, work with your banker to establish one at the best possible rate. Start at prime and go from there. There are also other ways to enhance working capital. If you absolutely must, use a credit card but don’t borrow money from your customers. It's a windfall for your customer but you can’t afford it.

Picking the Right Global Banking Partner

Growing economic considerations are motivating more and more American businesses to actually set up operations overseas, not just ship their goods abroad. Globalization presents a multitude of challenges. For the corporate treasury professional, the challenges are how to cope with the different regulations in each country, regulatory restrictions on capital inflows and outflows and how to consolidate it all under the one roof of the corporate treasury purview

The demand to consolidate foreign treasury operations within a domestic centralized treasury system is driven by the growing awareness of financial controls, as well as the need for cost and time-effective methods. Accordingly, corporate treasurers must have a consolidated view of their activity. The first, and arguably the most important, step is to establish a common banking platform. They can then manage their treasury operation more effectively across country lines. This begins with selecting a knowledgeable banking partner.

Ideally, this partner will be a global bank with deep roots in local markets across the treasurer’s international sphere. The enormity of these global institutions, however, tends to limit their ability to provide a centric relationship to provide the comprehensive strategic and analytical reporting data as well as compliance, regulatory and country risk information required for effective global cash management.

It is therefore more important that the corporate treasurer select a global financial partner who is familiar with their company, who knows how they collect, how they pay, and how they manage the time zone challenges to ensure maximum effectiveness wherever on the planet they do business.

Lastly, it is imperative that the corporate treasurer not lose any functionality of their local treasury operation. The right financial partner will provide an assigned account manager who will be able to help structure an effective solution by providing electronic banking systems and host-to-host connectivity to centralize the company's accounts payable, accounts receivable and payroll functions as well as a single-contact support point for the treasury professional.

Dollar Index Hits 5-Month High

A top Chinese bank regulator said Wednesday China will slow its massive lending spree and step up monitoring of banks as it tries to prevent speculative bubbles in real estate and other assets. The announcement sent the U.S. Dollar surging and gold lower as traders tried to hedge against a change in China’s aggressive monetary policy.

According to reports, China's economy expanded 10.7% in the fourth quarter,, fueling worries that their economy may overheat and prompt additional tightening measures. This created a demand for lower yielding assets at the expense of higher risk assets causing the Cash Dollar Index to rally to its highest level in 5 months. Some speculators believe that this signals that the dollar is on it’s way back to it’s 2009 range. However, given the massive US debt, this is probably unlikely.