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Citadel Global advises businesses to find the right partner to ensure effective cash management

‘A company such as ours helps a business cut through the noise, with a clear and concise description of the terms and conditions of specific products, as well as their tax implications,’ says Citadel Global director Bianca Botes.
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JEANETTE CLARK: Currently volatility is the order of the day, and medium- to large-size businesses must find solid footing in these ups and downs, also when it comes to cash management and achieving the required liquidity to keep operations performing optimally.

Today we are joined by Bianca Botes, a director at Citadel Global, to talk about some strategies to find the best solutions for your business. Citadel Global is a member of the South African Association of Treasury Advisors and complies with the Fx Global Code.

Bianca, you are an advocate of strategic cash-management solutions made up of various accounts or funds. Can you explain why that is, and how it benefits a business?

BIANCA BOTES: The ability to manage cash more efficiently within a business is often overlooked. Many businesses focus solely on having the cash available when needed, and we therefore often find that these businesses are holding money in business accounts which aren’t really giving them any type of return.

By deploying more dynamic and active cash-management strategies, businesses can often increase revenue as well as improve their tax position on returns earned on these types of cash holdings.

So we are quite passionate at Citadel Global about looking at these strategies, looking at how we can optimise them and making sure that we contribute additional value to these underlying businesses.

JEANETTE CLARK: And do you offer these services to any size of business? Would they be available to medium- and large-sized businesses, and would they be suitable for them?

BIANCA BOTES: Businesses who have cash on hand could benefit from optimising their cash holding. However, to make sure that it is cost-effective, I would suggest a business needs at least about R500 000 on hand to optimise these cash strategies.

JEANETTE CLARK: I know you have previously stated that too many businesses have their cash reserves deposited in non-interest-earning current accounts. Are there ways for businesses to earn a decent return from their cash reserves without subjecting the returns to the normal corporate tax rate?

BIANCA BOTES: Absolutely. I think when we start looking at cash management, we need to look at an array of products. I think people often get so caught up in the overnight call accounts or money market accounts that they forget that there are different funds out there. Some of these funds one can look at are dividend funds, where a client will earn a dividend instead of interest. Being taxed on dividends is obviously at a lower tax rate than just being taxed on interest, which is taxed as earnings, and they can improve their tax position on those returns earned on cash by just optimising the product selection rather than going into a normal call account or a money-market account.

JEANETTE CLARK: Now, considering the volatility of the rand, what would your advice be to businesses to mitigate some of the risk and the impact of that volatility on their available cash?

BIANCA BOTES: I think first and foremost it’s very important to make sure that you understand the cash-flow cycles within your own business. We often come across clients who haven’t actually mapped that out, who don’t know exactly what their exposure’s going to be in three months, six months or nine months down the line. There’s the option of working with an expert who can advise you on what the best way would be to mitigate those risks. When we start looking at risk, in terms of [a] business who has the need to import, companies first and foremost need to determine what their expectation around the rand is and how they can mitigate against any risk of the rand potentially weakening. If the expectation is that the rand could potentially weaken, we would propose a strategy to the client where they can lock in a worst-case scenario, but then also benefit from a strengthening rand, as an example, to optimise [and] ensure they have certainty of outcome.

JEANETTE CLARK: Working capital is surely the biggest factor you need to assess, depending on the business’s cash-flow requirements. How do your strategies consider this and still optimise returns on this cash?

BIANCA BOTES: What makes Citadel Global quite unique is that we do not have a cookie-cutter solution for any company. Our team of experts sit down with the decision makers within the business, and we look at the unique landscape of that particular business. Every single business is unique, and so is every single business’s cash flow, risk appetite, as well as cash requirements.

When partnering with Citadel Global, we sit with the financial decision-makers to understand their specific needs, and then also base our strategies on those specific requirements, making use of a combination of products and solutions. This strategy that Citadel Global compounds is also dynamic and efficient. So, we make sure that we keep on top of that strategy, sitting with the decision makers on a quarterly or bi-annual basis to make sure that the strategy evolves as the business evolves.

JEANETTE CLARK: Now there would be a couple of companies who can say, no, we can definitely do this in-house. Why would you argue it’s beneficial for a business to partner with a treasury company such as yourselves to assist them in cash management?

BIANCA BOTES: When you start looking at financial service providers in South Africa, we can name 10 just off the top of our heads. Within those companies all of them have different products, different funds that a client can choose from. Each of those funds comes with its own terms and conditions, returns, tax implications. It’s very difficult for a business owner or a financial decision-maker in the business who needs to focus on the core function of that business, to now go sorting through all this information to make an informed decision of what is best for their specific requirements and situation.

Citadel Global or a company such as ours helps a business cut through the noise, giving them a solution that is bespoke and tailor-made to their specific needs, and giving them a clear and concise description of the terms and conditions of those specific products, as well as the tax implications, making it easier for them to digest the information and giving them direct access to exactly what they need instead of a copious amount of accounts or funds that are not really suited to their specific needs.

JEANETTE CLARK: Now, Bianca, if you look at the world that we’ve got today – you’ve just mentioned the numerous options that you have just in South African financial services providers and the funds and so on that they offer – do you see this world becoming less complex or more complex, and therefore actually adding to the impetus for businesses to look for a cash-management partner?

BIANCA BOTES: I think things are becoming more and more complex as the world evolves. New products and solutions come out, and those products and solutions need to be regulated. Oftentimes we see that these regulations make it a lot harder for the normal consumer/[person] on the street to compare apples with apples, mainly due to terminology that is not often used outside of the financial services environment. So partnering with someone like Citadel Global or with a treasury company that can take all of these elements down for you, [will] make sure that the best product to suit your needs is actually offered at the end of the day.

It’s also very important for a business owner to make sure that they choose their partner wisely. At the end of the day, you want an independent partner who is going to look at a wide variety of solutions and give you the best possible solution, and not necessarily the one that is in-house to them and where they stand to earn the most fees.

JEANETTE CLARK: So just looking at Citadel Global quickly, what other services do you offer that you feel compare well with your cash management solution and put you in a good position to advise clients best?

BIANCA BOTES: Citadel Global is part of the wider Citadel Group. Within the Citadel Group, we can focus on individual as well as corporate financial services specialising in wealth management. On the Citadel Global side, we look at forex management, we are a holistic treasury management company, and we specialise in managing your risk and giving advice to our clients.

Because of our in-house capability from our asset-management team, our team of economists as well as our currency experts, we bring a holistic solution to our clients, covering every single area of the financial market, as well as what is impacting those financial markets at the moment. We are truly an advice-driven business, making sure that we give the best solution to our clients on the back of the best advice out there.

JEANETTE CLARK: Managing an increasingly complex business environment, including foreign exchange transactions and currency exposure, requires dedicated attention and an expert in the room.

We were joined today by Bianca Botes of Citadel Global, who advises that you find the right partner to make sure that effective cash flow and corporate cash management is available.

Brought to you by Citadel Global. 

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