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Reserve Fund Cash Management

This article aims to provide a high-level understanding of how our Toolkit can help most Condominium Corporations manage their Reserve Fund more effectively.



The cash management of a Reserve Fund is very important function of any Condominium Board. Depending on the size of your Reserve Fund, a sub-optimal cash management decision can create a significant negative financial impact.


The cash management function is an extremely complex process because it typically needs to evaluate many sources of information to make optimal decisions. The factors that may need to be evaluated include many of the following:

  • The expenditure forecasts from the latest Reserve Fund study

  • The current Investments (size, expected return, maturity date, ...) in the Reserve Fund

  • The expected schedule of Owner contributions into the Reserve Fund

  • Any pending expenditures outside of the Reserve Fund study forecasts

  • The current Corporation Investment Policy

  • The prevailing Interest Rates of the current savings account and any new Investment products

  • Past and present Inflation Rates

Given the complexity that exists within the cash management process, Condominium Boards rely on their support system of external partners for assistance. External partners can provide relevant information, guidance and support but all final decisions are approved and owned by the Condominium Board.


A list of typical external partners can be found in the Article: Building a Strong Future: Effective Reserve Fund Management.


The Function of our Toolkit


A prominent feature of our Toolkit is that enables a Condominium Corporations to establish a systematic cash management strategy for their Reserve Funds that is fully customized to their specific needs. Once all Corporation information is submitted into the system, our Toolkit will continuously monitor the status of your Reserve Fund and recommend the optimal next action for you to consider taking.


Automating a Complex Function


Our Toolkit is designed to help Corporations ultimately implement a customized, systematic and consistent cash management strategy for their Reserve Fund. The Toolkit utilizes our fully customizable Cash Management Engine that was fully developed from scratch by our team. The engine has the power to continuously compute optimal decisions while evaluating any number of relevant factors. Most should be able to appreciate why leveraging the power of mathematics and technology is highly beneficial for making complex cash management decisions.


By utilizing a systematic and data-driven cash management process, Corporations will reduce many sources of error including the many that arise from human behaviours and biases. Condominium Owners will greatly appreciate an established systematic process that will operate consistently and effectively as the composition of the Board evolves.


Enabling Research and Learning


Most Board members do not have the ability or the tools to understand the impacts and implications of making various adjustments to a cash management policy. How can a Condominium expect their Board to effectively manage a Reserve Fund when their Board members have no ability to learn about the potential impacts of their decisions?


Our Toolkit allows Board members to explore performance estimates of various hypothetical cash management strategies under a variety of customizable assumptions. By giving every Board member access to a sandbox environment where they can explore and learn, Condominium Boards can start to have meaningful discussions of potential alternative strategies among themselves and with their external partners in a productive and ultimately profitable manner.


Toolkit Features


Full Customization of Computation Engine


Our Cash Management Engine can computed estimated projections based on the user inputs supplied. Users can also edit every parameter that is used by the Cash Management Engine to ensure that any computed results are reflecting the specific needs and assumptions of the user.


It should be well understood that any output from our Toolkit should never be considered by anyone as financial advice. Condominium Corporations should use their Financial Advisors and any other relevant external partners to acquire financial advice and to discuss any potential financial decisions. The output from our Toolkit is the result of performing a set of transparent calculations, based on the inputs and parameters provided by the user. Given that the all inputs are fully customizable by the user and that the calculation process is transparent to the user, it should be clear that any output from the toolkit is a computational response to the inputs of the user.


It should also be well understood that any output from our Toolkit is accurately calculating an estimated forecast based on the inputs provided. The Engine implemented various statistical methods to ensure a reasonable computation output. Therefore, the user should be confident to compare and contrast various outputs using different inputs.


View Simulations


Our toolkit provides users an ability to quickly view a forecast estimate of new cash management strategy. Users can also adjust any parameter used by the underlying calculation engine to see the impacts of alternative assumptions.


The ability to access a sandbox environment to play with new cash management settings and calculation parameters allows anyone to learn about the potential impacts of various choices, explore various new ideas and validate alternatives to foster valuable discussions with external partners.


Next Actions


Our Toolkit will always publish the optimal recommend actions for the Board to evaluate. As information is updated, the system will automatically recalculate the most optimal action based on your specific settings.


By allowing a system to process the data pertaining to all the relevant factors and compute the best cash management action, many steps that were prone to errors are eliminated.


It was important for us to design a system that integrated effectively with most Boards operate. Therefore, any automation will only produce a recommendation for discussion by the Board. The Board will still be responsible for instructing any action which can be fully aligned with the recommendation or not.


Summary


We believe that our toolkit can help most Condominiums discover ways to add additional value to their Reserve Funds. Value that may come from reducing errors in their current manual cash management processes and/or implementing a more efficient and informed cash management strategy with clearly defined objectives. Our toolkit should give any Condominium a good understanding on how they expect to add value and if there is any risks in realizing value.


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