Security Cash Flows

Each bill or bond you hold pays you back on a schedule. A bill repays its face value at maturity. A note or bond pays coupons, often every six months, and its principal at maturity. Each expected payment is a security cash flow with the security code, due date, coupon amount, principal amount and the purchase instruction it comes from.

A cash flow is Draft when scheduled and Submitted when the custodian reports the receipt. The Treasury Approver approves it after checking the scheduled amounts against the purchase instruction and the verified custodian evidence, and the decision date is recorded. It is Completed once the receipt is reconciled, or Rejected when the amounts do not agree.

• Scheduled from the purchase. Each cash flow links to the instruction that bought the security, so scheduled amounts can be checked against what was bought.
• Approved against custodian evidence. A coupon or maturity is approved only when verified evidence of the receipt supports it.
• Calendar of what is due. Upcoming coupons and maturities appear by due date for cash planning.

Agree how security codes are recorded, such as CUSIP or ISIN. Decide who schedules cash flows after a purchase and who approves them. Agree the tolerance for differences between scheduled and received amounts and how a short payment is investigated. Load the cash flows for securities already held.

Treasury holds $2,000,000 of a two-year note paying a 4.25 percent coupon semiannually. After the purchase settles, the Treasury Preparer schedules four coupon cash flows of $42,500 and a principal cash flow of $2,000,000 at maturity, each linked to the purchase instruction.

On the first coupon date the custodian’s evidence shows $42,500 received. The preparer submits the cash flow. The approver checks it against the schedule and the verified evidence and approves it, and it is completed. Six months later the custodian reports $42,000; the approver rejects that cash flow with the reason and the preparer raises it with the custodian.

• Security Cash Flow Calendar — Scheduled and submitted coupons and maturities by due date.
• Security Cash Flows Schedule — Every cash flow with security, purchase instruction, amounts, decision date and status.
• Cash Flows Awaiting Approval — Submitted cash flows waiting for the approver.

• Coupon and maturity reconciliation: From schedule to approved receipt.
• Bank statement reconciliation: Match the receipt to the bank movement.

Load your current holdings’ schedules before go-live.