Companies Increasingly Pleased with Cash Management Providers

December 7, 2004 ( - US companies increasingly believe that their cash management providers are offering above-quality service, a recent survey shows.

Almost a quarter of respondents to Greenwich Associates’ 2004 cash management research stated that their banks’ service quality improved noticeably in the last 12 months, according to a press release from the company. The survey focuses on customer’s preferences in treasury management, product sales and services, operations performance, and customer service.

Concentration of cash management services is becoming increasingly common for US companies, the survey reports, with the average number of banks used for cash management falling from 5.7 in 2003 to 5.4 this year. The percent of overall fees – or “share of wallet” – that companies allocate to such services increased however, from 52% to 57%. Thirty percent of banks expect to see further consolidation in the future.

Most companies – 83% – use their cash management providers for short-term investments, with companies using an average of slightly more than one provider for such services.

With companies increasing their cash holdings, how to get the most out of such holdings and marketable securities investments, is a question that is increasingly asked. The Greenwich Associates survey shows that 85% of US companies have a written investment policy that attempts to answer such questions. In terms of benchmarking such activity, LIBOR is used by a third of companies, while 36% benchmark against a money market fund index. A very small number of companies – less than 10% – benchmark their performance against short-term government paper or their peers, the survey shows.

Goals on returns for these activities are hovering around 1% on the year, similar to last year’s figure. Only 5% of companies have targeted returns for short-term cash and marketable securities at over 3%, the survey reports. As for specific investments, three-quarters of all allocations are to AAA-rated credit, while between 10% and 15% is invested in AA-rated credit. Four percent is allocated to A-rated credit on average, 1.1% to BBB to BB credit, and 6% to securities with no ratings.