How to AVOAR Your Cash Data

This is the second in a series of three articles on Cash Personality. The first article focuses on what is Cash Personality, how and why it's important, and provides some examples. This article focuses on the data needed to manage your cash. And the final article focuses on some example reporting that can help you better identify and communicate your Cash Personality.

Knowing your company's cash personality can help you better manage your company's most liquid asset. But how do you go about collecting the data needed to do this effectively. You'll need to AVOAR your cash:

• Aggregate data from various sources/banks,
• Validate the data for integrity and consistency,
• Organize or standardize the data in a way that it can be useful, and then
• Analyze and Report on the data in a way that helps you make efficient and timely decisions.

So what’s needed to determine your Cash Personality?

It takes a data, lots of data, to get a true understanding of Cash Personality. There are several sources and types of data that are related to cash:

• Banking data (BAI, CSV, SWIFT, QFX, QBO, QFX, QIF, and CSX)
• Investment data (type of investment, duration/maturity)
• Currency (type, value date, exchange rate)
• Debt data (external and intercompany, covenants)
• Internal data (forecasting, AR, AP, CapEx, payroll) 

Each data source may have its own unique constraints that may in turn influence personality in the cash data. For example, business banking data vs corporate banking data where the former has more limited access and limited details vs broader access and detailed information in the later. Investment data is also different in the type of data provided (type of investment, maturity date, price, etc) and it’s typically related to growth focused activities instead of operating activities.

The type of currency that cash is denominated in also affects the personality. Currency related data has the additional variable of the exchange rate which is another characteristic to consider. Similarly, foreign bank data can be different based on the region where you’re doing banking. Some regions like Europe are more progressive and tech savvy - both the banks and customers – so you tend to see more electronic transactions. These types of transactions have unique characteristics compared to more paper or check based transactions. Both create different profiles in cash based on things such as timing of settlement or type of information included with the transaction.

"Let you systems do all the non-value add work so you can focus on the decisions!"

Information related to debt also has its unique characteristics. Payment intervals, interest rate, penalties, fees, and covenants all influence inflows and outflows over the life of the debt. Transactions associated with intercompany debt may move in the form of book transfers rather than check, ACH or wire like is used for external debt. There are many other unique qualities related to debt and depending on the amount of debt you have relative to your overall cash levels; they may have more or less influence on your overall Cash Personality.

The characteristics of cash coming from internal data, such as custom reports (i.e. forecasts, board reports, managerial reports) and ERP or TMS data and reports, can also influence the overall cash personality. Oftentimes the internal reports and data are developed based on the aforementioned data and when done correctly, they merely reflect the Cash Personality.

In addition, cash data can also vary based on other variables such as the time the data is viewed, if presented in a graph or a table, the time period examined, data differences between systems, and many other factors. Because of this, you’ll need to normalize the data as much as possible. This includes being very clear when outlining the parameters of any report on cash and being consistent over time. But some distinct cash personalities will remain regardless of your efforts to normalize, define or report consistently. That’s the nature of cash. But now that the effort to organize data and identify unique traits is in place, you can start to analyze and manage them based on their unique personalities.

Based on all these variables, it’s easy to see that different data sources have different data sets, different timing, non-conforming details, and other characteristics that often influence Cash Personalities. Ultimately, the data source and type of data translate into cash inflows and outflows that affect your accounts. It’s the collection of all these inflows and outflows over time that generates trends, anomalies and nuances that can be used to define Cash Personality. And personality can be defined at the company level, at the business unit level, by bank, by account or by a combination.

How do you get all the data and how does that affect Cash Personality?

Gathering or aggregating information on cash can sometimes be a difficult process and come from multiple internal and external sources. As a result, when you have multiple aggregation techniques you'll likely end up with multiple characteristics for the data that is being aggregated, thus creating multi-personality cash.

 Aggregation

Sources and tools for aggregation can be divided up into automated (external and internal), manual, and hybrid solutions.

• Automated options can be external and internal. External sources include secure and other connections designed to exchange data and include: secure file transfer protocol (SFTP) systems, application program interfaces (API), SWIFT, screen scraping, and BOTS. Each have their pros and cons and need to be evaluated based on security, timing, technical capabilities of your company, and cost. Internal sources include data from ERP systems, accounting systems, HR systems, and other systems that generate information that are directly or indirectly tied to cash.
• Manual sources include data secured manually by logging in to bank and investment portals, market data portals (interest and FX rates for example), spreadsheets, and ERP/accounting systems.
• Hybrid systems that contain automated and manual sources and/or straight-through-processing of data into an in-house or third-party system. 

After you get all the data, then what?

So you successfully secured all the data and it's set up to happen on a recurring basis - now what? In addition, what characteristics can you discern from these static data sets?

That's difficult to determine because the data has differing formats, standards and it's not interactive. Because of this, sometimes the only personality coming from these data sets is a change in the cash manager’s personality to one of frustrated, angry and likely a bit stressed. All that disparate information coming from varying aggregation sources creates…chaos, confusion and disorder.

But remember there’s opportunity in chaos!

By loading the differing data sets into a system or spreadsheet, then normalizing the data (before or after loading), and running a focused analysis, you'll be able to identify trends, anomalies, differentiators, and other personality traits to help you make heads or tails of what the data is saying about the Cash Personality.

 Tools of the trade

There are several tools for a cash manager to help with all the aggregation and reporting:

• MS Excel (spreadsheets) - the most commonly used tool
•  Treasury Management Systems (TMS)
• ERP systems/modules
• Custom application(s) built in-house
• Combination of many or all of these

Each of these systems has their pluses and minuses. But you should make sure to focus on simplicity without compromising on the power needed to provide intelligent and actionable information. I'll do another article on the pros and cons of each at a later date. Until then, remember each tool adds some characteristics to the cash process, thus influencing personality or the ability to properly identify and analyze personality traits.

Now the real psychology of cash starts…when you’re using your data and the understanding of that data to make decisions and to act!