Q&A: How Do I Get My Paper Statement and 822 file to Match?

Short Answer: 

You don't.

This does not depend on whether your Treasury Dept has an Account Analysis system or uses MS Excel.  It depends on which, the paper statement or EDI 822 file, is the official account of record.

The official account of record means one particular format in which the bank sends your Treasury department's invoice for bank fees due is the only record by which the bank considers "official".  For example, if the account of record for your company is the EDI 822 file, then what the paper statement includes or doesn't include is irrelevant because only the data sent via the EDI 822 file is the official record of what your bank says your company owes it in bank fees for that particular time frame.

This is why my short answer to how to balance one to the other is "you don't" because one must serve as the account of record while the other is merely an alternate copy of the same data (ideally).  But, hopefully, you are not paying for both!

Let's step back and define what is a Paper Statement...

A paper statement is the either monthly or quarterly often itemized paper invoice (not in an electronic format) companies receive from their bank(s).  It includes the account name, account number, account level, any ECR, any Earnings Allowance, list of all balances for the period, list of bank service activity and their fees, total net fees due, etc.  This statement tells you what services you've used at what rate and what you owe after any earnings credit is applied.  And, either monthly or quarterly, you pay those bank fees due.

Now, what is an EDI 822 file?

The 822 file is the exact same information but in an electronic format so it can be captured by an electronic Account Analysis system.  There is nothing you should receive on a paper statement related to your Account Analysis that you can't receive in an 822 file.  Ideally, one should be an identical representation of the other.  If there is data omitted from the 822 file, then you should contact your bank for a restated 822.  

Welcome to an Electronic World!

Despite the notion of an official account of record, this is still a frequently asked question mainly because some Treasury departments consider the paper statement to be their account of record (not sure this is official on their bank's end) so they frantically try to match every single dollar amount/charge seen on the paper statement to what was captured from the EDI 822 file.  When a balance/charge does not match, they explain how management will freak out at the discrepancy so an explanation has to be made somehow even if it means manually inputting data where it was not just to balance things.

With the popularity of Account Analysis systems and the EDI 822 file along with the two international BSB formats available; most Treasury departments who have the bank and account size to justify it should only receive an electronic Account Analysis file.

With an electronic system, what purpose does a paper statement really serve?  Making the EDI 822 file your account of record alleviates the desire to match one to the other and does hold the bank accountable.

Don't have an Account Analysis system?  Then the paper statement will be your only official account of record by default.  

As always, if you have an Account Analysis question please feel free to email me: GirlMeetsAA@gmail.com.

  

Happy Analyzing!

Balance Required (8/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

Balance Required

Sometimes referred to as Collected Balance Required or Balance Equivalent - Total Service Charges, this is the amount required to offset total analyzed service charges for a current period.

This differs from the Balance Required Multiplier which is the amount required to offset $1 of analyzed service charges.

In perfecting my calculations, I was confused as to which definition correctly fits which title.  If you Google, "Collected Balance Required", you may find the definition given isn't truly correct. But let's breakdown the math...

Calculating the Balance Required

Lets assume the following numbers are true:

Analyzed Service Charges (ASC) = $500.00
Earnings Credit Rate (ECR) = 0.2%
Days in Period (DP) = 31
Days in Year (DY) = 365
Reserve Requirement (RR)** = $0

Collected Balances (CB) = (ASC) / [(ECR * DP/DY) * (1 - RR)]

CB = 500 / [(0.002 * 31/365) * (1 - 0)] = $2,943,548.38

To offset the total analyzed charges of $500.00 for the current period, the collected balance required is $2,943,548.38.

That's a sizable balance required just to offset $500 in analyzed service fees!  But imagine (and calculate) how much less that Balance Required would be if, and I'm just dreaming here, the ECR was 2%.

Balance Required to Offset $1

There are 2 ways to calculate this balance:

1. Collected Balance Required / Analyzed Service Charges
2. (1/ECR) / (DP/DY)

Using the 1st option, $2,943,548.38 / $500 = $5,887.09.  This is the simplest way to calculate the Balance Required Multiplier.

However, if you do not already have the Collected Balances Required amount, you will use the 2nd option.

=(1/0.002) / (31/365) = $5,887.09

The "multiplier" part comes in when you multiply this number by Service Charges to get the Collected Balances Required:

$5,887.0968 * $500 = $2,943,548

I added the next two decimal places which would have otherwise skewed the total by $3.  In this example, the balance required to offset $1 in service charges (if the above assumptions still hold true) is $5,887.09.

Auditing your Balance Required and/or Balance Required Multiplier

If you can read the raw data of the EDI 822 file, these balances should be sent by your bank(s). In an ideal world, what is sent on the EDI 822 file would also be sent on the paper statement.

For example, one of the large financial institutions has a dummy Account Analysis statement online which includes the "Service Charge Multiplier".  Using this number, the account holder can multiply it by the total service charges to find their Collected Balances Required.

The best way to audit these balances is still via an Account Analysis system.  It allows one to budget and forecast related service charges to plan future account collected balances required esp. with the current very unappealing ECR offerings.

Remember The Math

In the math thus far, Balance Required is the 8th component on the Compensation side of the Account Analysis equation.  Only 6 more to go! Til then...

Happy Analyzing!


**Most banks no longer deduct 10% as a Reserve Requirement so I've plugged in $0.00

Q&A: Is the CTP Worth the Time, Money, and Effort?

These last few weeks have been a time to consolidate my thoughts and posts into topics I believe readers want and need to know regarding Account Analysis. Although this post isn't directly related to Account Analysis I think it's interesting the number of questions I've received regarding the CTP exam. As a result, I have decided to try to address majority of them from my perspective and experience.

1. How long did you study for the CTP exam?  
2. What parts of the BOK were on the exam?  
3. Were you asked to do long calculations?  
4. Are there any lists to remember?   
5. On a scale of 1 - 10, how difficult is the exam?   
6. Is the AFP Learning System worth the money?  
7. Is the TMExam subscription enough?  
8. Did passing the CTP help your career?  
9. No one has heard of the CTP exam so do you think it's worth it? 
10. Would the CTP complement my MBA/CPA/CFA?   
11. Is the CTP required to get a Treasury position?  

• How long did you study for the CTP exam?  I think the recommendation is about 6 months but it depends on your background.  I had zero significant background in Treasury so I gave myself roughly 9 months to go back over the BOK just to get most of the reading done and understood. This also gave me time to complete the questions at the end of each chapter.  I wasn't sure if this would help me during the exam but it did help reinforce the material.  Whether those questions in any form would appear on the exam was a risk worth taking because I'd rather have that knowledge and not need it than to need it and not have it.  For others who have years of experience working in Treasury (or in some significant part of  Treasury), you might not need to take 9 months.  Maybe you only need 3 months to feel confident.  One client has worked in Treasury for at least 6 years.  She put off studying for the exam until the last minute almost doing a major cram session while I had carefully scheduled out my weeks for the last few months to make sure I covered everything in bite size portions. She passed. Easily. On the first try.  So, the answer to this question depends greatly on your current Treasury knowledge base and how much time you have available to devote to studying regularly. There is no wrong answer here.

• What parts of the BOK were on the exam?  Since the CTP is now in its next phase of testing windows with a completely new edition of the BOK, my answer to this question may be very irrelevant. However, when the suggestion is made to study everything in the book, just in case...you should really study everything in the book, just in case.  I took the exam during the June/July 2013 testing window and felt there were a lot of ECR, Earnings Allowance (EA), and Collected Balance (CB) questions in the beginning of the exam.  Notice anything ironic about this observation?  It could very well be that I calculate ECR, EA, and CB on a nearly daily basis so it would stand out and I would feel like I breezed through the first 20 or so questions. In my opinion, there were some sections which didn't have a heavy presence on my exam which was a relief because they were all part of my "Weak Areas" which means I spent more time studying them, just in case. 

• Were you asked to do long calculations?  No.  I had to do several long annoying Future Value calculations just to get one answer to one question but there isn't anything I can recall which took more than a couple of minutes to work out.  Actually, my testing center had a very subpar calculator which could only do the very basic of functions and maybe take the square of something.  I was freaking but the guy said if I really needed an actual calculator to let him know and they will find one. Somewhere. Either I wasn't asked to do more than basic calculations or my math skills are insane because I didn't need anything more than what I had.    

• Are there any specific lists to remember?  I recall a lot of definitions.  When I found myself throwing a blank, it was really easy to eliminate the ridiculous options and narrow it down to two.  Most times it was basic "choose the best answer" but I remember these being very easy to answer if you knew the material well enough to not get tripped up.  Basically, if you weren't 100% sure which was the answer, at least 2 of the 4 were outrageous enough to eliminate themselves increasing your odds of guessing the correct answer.  

• On a scale of 1 - 10, how difficult is the exam?  In answering this question, I compared it to the CPA or CFA exams which I have not taken but have heard they are some of thee most difficult exams in the Finance/Accounting realm. I don't think the CTP is on the same difficultly level as these exams.  However, having taken the exam twice, I thought the first time around was indeed difficult.  The second time around was almost a breeze.  I contribute this difference in experiences to how prepared I was in both situations so, again, this can vary depending on the person.  An experienced Treasurer can think the CTP is easy just as an experienced Accountant could think the CPA wasn't much of a struggle at all.  For the sake of giving an answer, I'd say it was right in the middle as far as difficulty for someone with zero prior Treasury knowledge who had prepared well for the exam.  

• Is the AFP Learning System worth the money?  I didn't use the AFP Learning System either time to prepare for the CTP exam so I can't say whether it is or is not worth the cost.  

• Is the TMExam subscription enough to pass?  For me, TMExam was not enough.  I liked the crossword puzzles and quick quizzes over each section which I took repeatedly.  I found the most difficult and helpful practice questions and quizzes came from the Preparing for Treasury Management Certification book (which is sold out indefinitely).  The questions are probably more difficult than any you'd find on the actual exam but it helped get me into the mind frame I needed to be in to tackle the subject matters well.

• Did passing the CTP help your career?  Not yet.  My answer is more optimistic at this point for various reasons including the fact that it has been less than a year since I passed the exam.  I still have the same position at my company, the same pay (minus a pay increase mostly for cost of living inflation), and the same responsibilities.  My company didn't cover the study materials for the CTP, the exam fee, or the AFP membership which initially goes along with that.  Everything was paid out of my own pockets.  In this case, my company didn't require the CTP for my position but there are some companies who do require it.  I personally know CTPs whose employers covered everything and gave them a pay raise once they passed the exam.  In this situation, having the CTP did help their career.  Also, most career opportunities which require or even prefer the CTP are not in my area (Vermont) so I am automatically limited in how I can make the CTP work for me.  This may not be the case for a vast majority so the answer to this question depends on many variables

• No one I've asked has heard of the CTP exam so do you think it's worth it?  Another difficult question to answer because I had to ask the person(s) for more information regarding their background, future career goals, etc.  Since the question was asked of me, I assessed my own situation to determine if at this point in time it was worth my efforts (twice); the jury is still out.  As stated above, I had to pay for everything required to eventually pass the CTP.  As most CTPs know, you are required to complete 36 continuing education credits within 3 years to retain those 3 letters.  Unless my company approves and covers my attendance to one of the many AFP conferences held annually, I will be forced to decide whether the cost drowns the benefit of having the CTP.  In the meantime, I've been sitting in on every free usually 1.2 CTP credits webinars I can fit into my schedule.  In addition, there is a required Recertification fee so you can submit and have your credits processed. However, for someone else, these challenges might not be present at all so they may feel the CTP is definitely worth the time, money, and effort.  

• Would the CTP complement my MBA/CPA/CFA?  I think so.  It shows mastery in a different section of the overall pie but certifications are usually not a bad thing when it comes to setting yourself apart from other applicants.  I have a Masters in Accounting.  I like to think that adding the CTP shows a breadth or depth of knowledge that's not limited to one specifically small area. Also, I was told that it also shows an aptitude to learn and master concepts.  Whatever works.   

• Is the CTP required to get a Treasury position?  No, it's not required but for some positions it is or may be "preferred".  It depends on the company and what the Treasury department determines to be a require skill set or knowledge base to do the job well.

Hopefully, this answers most questions anyone may have regarding the CTP.  Real answers to real questions from a real person not in a conflict of interest position.  

I still welcome questions posted to the blog or emailed to me.  Never think you are being bothersome or bombarding me with dumb questions.  

Next week, I shall return with more lucid Account Analysis posts. 

Happy Studying!