How to identify excess cash with Agicap

In today's rapidly changing financial landscape, identifying and managing excess cash has become a crucial aspect of corporate treasury management. Agicap, a leading cash management solution, offers a comprehensive approach to help businesses optimize their cash flow and identify opportunities for short-term investments. In this blog post, we will explore how Agicap can help you identify excess cash and make the most of your company's financial resources.

Why you need to identify excess cash now

Over the past 18 months, the financial landscape has shifted from a zero/negative interest rate environment to one where current rates allow corporate treasurers to generate returns on excess cash. This change has made excess cash management an increasingly important aspect of corporate treasury operations.

For example, just one year ago, Agicap had no short-term investment strategy and no banking tools for managing excess cash. Today, the company has implemented a daily investment routine, and the average daily ratio of short-term investments compared to uninvested cash has become one of the top three KPIs for Agicap's VP of Accounting & TAX, Quentin Millet.

Additionally, 18 months ago, Agicap's investment accounts generated only 0.1% annual interest and were primarily used to avoid financial penalties. Now, with Agicap's advanced cash management features, companies can actively generate returns on their excess cash.

Agicap's Key Features for Identifying Excess Cash

1. Accurate Cash Forecasting

Agicap provides an accurate cash forecast, which is essential for determining excess cash and planning short-term investments. By offering a clear view of your company's financial future, Agicap enables you to make informed decisions about cash management and investment strategies.

2. Cash Balance Table

Agicap's cash balance table allows you to set up thresholds for excess cash, making it easy to identify when your company has surplus funds that can be invested. This feature helps you maintain optimal cash levels and avoid unnecessary financial penalties.

3. Custom Dashboards for Short-term Investment Modeling

Agicap's custom dashboards offer a model for short-term investments (deposits only), enabling you to identify opportunities for maximizing returns on your excess cash. This new model allows you to take advantage of current interest rates and contribute to your company's cash generation.

The Process for Identifying Excess Cash with Agicap

Agicap helps businesses segment their cash flow cycles and associated time scales, allowing for more effective cash management.

Effectively pinpointing your surplus funds necessitates a meticulous and current cash flow projection. This empowers you to comprehend your organization's cash inflows and outflows, as well as any potential liquidity shortfalls. Here's a step-by-step guide to begin:

1. Develop a comprehensive cash flow projection

Start by itemizing all anticipated cash inflows (e.g., client payments, loans, grants) and outflows (e.g., vendor payments, wages, taxes) for a specific timeframe (e.g., monthly, quarterly, annually). Incorporate both recurring and one-time transactions.

2. Consistently refresh your projection

To maintain precision, routinely update your cash flow projection with actual data and modify your estimates accordingly. This enables you to monitor any shifts in your organization's financial status and make well-informed decisions regarding cash administration.

3. Establish your investment timeframe

With a lucid understanding of your cash flow, ascertain your investment timeframe. This represents the duration in which you can comfortably invest your surplus funds without jeopardizing your organization's liquidity requirements. Take into account factors such as impending expenses, cyclical variations, and potential expansion opportunities.

4. Evaluate your risk tolerance

Prior to investing your surplus funds, it's crucial to assess your organization's risk tolerance. This assists you in selecting investment alternatives that correspond with your financial objectives and risk preferences. Contemplate factors like your organization's financial stability, industry tendencies, and overall market conditions.

By adhering to these guidelines, you'll be able to precisely pinpoint your surplus funds and make well-informed decisions on investment strategies. Keep in mind, an accurate and current cash flow projection is the foundation of efficient cash management.

At Agicap, for example, there are two distinct cash flow patterns:

1. Short-term Pattern:

   • Approximately one month long
   • Steady cash inflow throughout the month
   • 60% of cash outflow during the last five days (mainly salaries)
   • Excess cash identified daily
   • Target: Investment opportunities within a 3-day to 3-week term range

2. Middle/Long-term Pattern:

   • Based on the cash declination of the business plan, updated twice a year
   • Dynamic and changing environment with a 12-month perspective
   • In a "scale-up" scenario: a forecasted bottom level of cash to be reached in a few months, followed by positive cash generation
   • Target: Cash excess forecast and investment opportunities at 6, 9, and 12 months

Conclusion Agicap's cash management solution empowers businesses to identify excess cash and optimize their financial resources. By leveraging Agicap's accurate cash forecasting, cash balance table, and custom dashboards for short-term investment modeling, companies can make the most of their excess cash and contribute to their overall financial success