Cash Management

In structured finance facilities, cash must flow through complex account structures according to precise waterfall priorities—ensuring debt service obligations are met, reserves are maintained, and excess funds are properly distributed. Manual calculation of these cash movements creates bottlenecks, introduces calculation errors, and delays fund transfers that impact facility operations and lender confidence.

Cascade's Cash Management solution transforms this process through automated waterfall calculations that determine exactly how cash should move between accounts based on pre-agreed business rules. Built on the foundation of reconciled cash positions from Cascade's Payments Reconciliation service, the system calculates required fund movements and generates precise transfer instructions for execution by a third-party cash agent—eliminating manual calculation work while maintaining critical separation of duties between instruction preparation and fund transfer execution.

Key Outcomes:

For Lenders: Accurate waterfall execution, real-time visibility into fund movements, and compliance with facility agreements

For Originators: Automated calculations, accelerated cash deployment, and elimination of manual waterfall analysis

For Both: Complete separation of duties between calculation and execution, transparent audit trails, and error-free fund movement instructions

The Challenge: Cash Management in Structured Finance

The Critical Role of Cash Management

Asset-backed lending facilities typically involve multiple bank accounts with specific purposes:

Collection Account: Receives borrower payments and loan proceeds

Reserve Accounts: Holds required reserves for debt service, liquidity, or compliance

Distribution Account: Funds lender payments and originator distributions

Operating Account: Covers facility expenses and servicing fees

Cash must move between these accounts according to a contractual waterfall that prioritizes:

Senior debt service payments

Required reserve replenishment

Subordinated obligations

Excess cash distributions

Without proper cash management:

Lenders face risk: Manual calculation errors can result in improper fund allocations, missed debt service payments, or inadequate reserves

Originators face delays: Manual waterfall calculations slow cash deployment and limit access to available distributions

Both face compliance issues: Incorrect fund movements violate facility agreements and create audit findings

The Dependency on Accurate Cash Positions

Cash management calculations are only as good as the underlying account balance data. Before any sweep can be calculated, cash positions must be:

Reconciled: Bank balances must match expected receivable activity

Current: Account positions must reflect the latest transactions

Complete: All relevant accounts must be included in the analysis

This dependency makes Payments Reconciliation the essential prerequisite for reliable cash management. Cascade's Cash Management service builds directly on reconciled cash positions to ensure calculations are based on verified, accurate data.

The Traditional Approach Falls Short

Manual cash management processes suffer from fundamental limitations:

Calculation Complexity: Finance teams must manually calculate waterfall allocations using spreadsheets, applying multiple conditional rules and priority sequences—a process prone to formula errors and version control issues.

Timing Delays: Manual calculations take hours or days to complete, delaying fund movements and creating cash drag that reduces facility returns.

Inconsistent Application: Different team members may interpret waterfall provisions differently, leading to inconsistent fund allocations across periods.

Limited Scalability: As facilities grow or add account complexity, manual calculation workload increases proportionally.

Separation of Duties Challenges: When the same person calculates and executes transfers, proper controls are difficult to maintain.

Audit Trail Gaps: Spreadsheet-based calculations provide limited documentation of the logic applied and decisions made.

The Cash Management Dilemma

Lenders need confidence that contractual waterfall provisions are being followed precisely. Originators need rapid calculations that enable timely access to distributable cash. Manual approaches force a trade-off between thoroughness and speed. The structured finance industry needs a solution that automates calculations while maintaining rigorous accuracy and complete separation between instruction preparation and fund transfer execution.

The Cascade Solution

Cascade's Cash Management eliminates manual calculation work through intelligent automation that applies facility-specific waterfall logic to reconciled cash positions. The platform serves as the calculation and instruction engine in the master servicing workflow—determining required fund movements and generating precise transfer instructions for a third-party cash agent to execute.

Critical Distinction: Cascade prepares instructions but never executes fund transfers. This separation of duties ensures proper controls while enabling automation of the calculation-intensive work.

How It Works: The Three-Stage Process

Stage 1: Data Foundation (Reconciled Cash Positions)

Cash management begins with verified account position data sourced from Cascade's Payment Reconciliation service:

Account Balance Integration:

Collection account reconciled balance

Reserve account current positions

Distribution account available funds

Operating account balances

Any other accounts defined in facility structure

Facility Rules & Parameters:

Waterfall priority sequence from loan agreement

Reserve requirements and target balances

Minimum balance thresholds per account

Maximum transfer limits

Timing requirements and cutoff times

Business Logic Configuration:

Conditional rules (e.g., "if debt service coverage < 1.2x, hold distribution")

Account routing specifications

Fee calculations and allocations

Rounding and precision requirements

Result: A complete data set of current cash positions and the rules governing how cash should move between accounts.

Stage 2: Calculation Engine (Waterfall Logic Application)

The calculation engine applies facility-specific business rules to determine required fund movements:

Priority Sequencing: The system processes the waterfall in order, calculating each allocation tier sequentially:

Tier 1 - Debt Service: Calculate upcoming interest and principal payments due to senior lenders

Tier 2 - Reserves: Determine reserve account replenishment needs to meet required balances

Tier 3 - Fees: Calculate servicer fees, trustee fees, and other facility expenses

Tier 4 - Subordinated Obligations: Determine payments to subordinated debt holders

Tier 5 - Distributions: Calculate excess cash available for originator distribution

Source/Destination Determination: For each required movement, the system identifies:

Source account (where funds will be withdrawn)

Destination account (where funds will be deposited)

Transfer amount

Transfer timing and priority

Validation & Constraints: Before finalizing instructions, the system validates:

Sufficient funds available in source accounts

Compliance with minimum balance requirements

Adherence to maximum transfer limits

No circular transfer logic errors

Conditional Logic Application: Complex scenarios are handled automatically:

"If excess spread > threshold, accelerate reserve funding"

"If collection shortfall detected, skip distribution tier"

"If operating expenses exceed budget, flag for review"

Result: A complete set of calculated fund movements with amounts, accounts, timing, and supporting logic documentation.

Stage 3: Instruction Generation (Output for Cash Agent)

The final stage produces formatted instructions for the third-party cash agent to execute:

Transfer Instruction Format: Each instruction includes:

Instruction ID: Unique identifier for tracking

Source Account: Account number and bank details

Destination Account: Account number and bank details

Amount: Precise transfer amount (to the cent)

Value Date: When the transfer should be executed

Priority: Sequence order for execution

Reference: Description and facility reference number

Authorization: Digital signature

Instruction Package: All instructions for a sweep cycle are bundled with:

Summary cover sheet with total movements

Account-by-account breakdown

Waterfall calculation supporting documentation

Timestamp and version control information

Delivery to Cash Agent: Instructions are transmitted via:

Secure API integration (automated)

SFTP file transfer (scheduled)

Secure portal upload (manual review cases)

Reporting & Documentation: Cascade generates comprehensive records:

Sweep Calculation Report: Shows all waterfall tiers and calculations

Instruction Summary: Lists all transfers with amounts and timing

Account Position Report: Pre-sweep and projected post-sweep balances

Audit Trail: Complete calculation logic and decision documentation

Result: Ready-to-execute transfer instructions delivered to the cash agent, with complete documentation for lender review and audit purposes.

Key Benefits

For Lenders:

Waterfall Compliance: Automated calculations ensure contractual waterfall provisions are applied consistently and accurately across every sweep cycle.

Real-Time Visibility: Continuous monitoring of account positions and upcoming calculations provides early warning of potential shortfalls or covenant violations.

Audit Confidence: Complete documentation of calculation logic, waterfall application, and instruction generation satisfies regulatory and audit requirements.

Risk Management: Systematic validation against reserve requirements and minimum balance thresholds prevents improper fund movements.

Separation of Duties: Clear distinction between Cascade (instruction preparation) and cash agent (execution) maintains proper controls.

For Originators:

Operational Efficiency: Automated waterfall calculations eliminate hours of manual spreadsheet work, reducing operational costs and human error risk.

Accelerated Cash Access: Rapid calculations enable same-day or next-day distributions, improving working capital management and liquidity.

Scalability: Handle complex multi-account structures and high-frequency sweep cycles without increasing finance team workload.

Predictable Distributions: Clear visibility into waterfall calculations and projected distributions improves cash flow forecasting.

Exception Management: Automated validation flags potential issues (insufficient funds, covenant breaches) before instructions are generated.

For Both:

Transparency: Shared visibility into calculations, account positions, and instruction details eliminates disputes about fund allocations.

Complete Audit Trail: Every calculation, instruction, and account movement is documented with timestamps and supporting logic for compliance purposes.

Error Elimination: Automated calculations remove formula errors, transcription mistakes, and inconsistent rule application that plague manual processes.

Standardized Process: Consistent application of waterfall logic ensures uniform treatment across all sweep cycles.

Integration Efficiency: Seamless flow from Bank Account Reconciliation to Cash Management to cash agent execution creates an end-to-end automated workflow.

Demonstration: Daily Sweep Calculation Process

The following demonstration illustrates how Cascade's Cash Management system processes a daily cash sweep for a consumer loan facility. This example uses fictional data to show the data foundation, calculation engine, and instruction generation workflow.

Note: All data, accounts, and amounts in this example are fabricated for demonstration purposes only.

Sweep Scenario: Daily Cash Movement

Date: November 15, 2025
Facility: Consumer Installment Loan Portfolio
Sweep Frequency: Daily at 2:00 PM ET
Cash Agent: First National Trust Company

Stage 1: Data Foundation (Reconciled Account Positions)

Reconciled Account Balances (as of 2:00 PM, November 15, 2025):

Account	Account Number	Reconciled Balance
Collection Account	1234-5678-COLL	$487,350.00
Debt Service Reserve	1234-5678-DSR	$125,000.00
Liquidity Reserve	1234-5678-LIQ	$75,000.00
Operating Account	1234-5678-OPER	$8,500.00
Distribution Account	1234-5678-DIST	$2,100.00

Total Cash in Facility: $697,950.00

Facility Waterfall Rules (from Loan Agreement):

Priority 1 - Senior Interest Payment:

Due: November 20, 2025

Amount: $150,000.00

Destination: Lender payment account

Priority 2 - Debt Service Reserve Target:

Required Balance: $200,000.00

Current Balance: $125,000.00

Shortfall: $75,000.00

Priority 3 - Operating Expenses:

Monthly servicer fee: $15,000.00

Due: November 20, 2025

Priority 4 - Liquidity Reserve Target:

Required Balance: $100,000.00

Current Balance: $75,000.00

Shortfall: $25,000.00

Priority 5 - Excess Distribution:

Any remaining funds after Priorities 1-4 are satisfied

Destination: Originator distribution account

Stage 2: Calculation Engine (Waterfall Application)

Available Funds Analysis:

Starting with Collection Account balance: $487,350.00

Priority 1 Calculation - Senior Interest Payment:

Required: $150,000.00

Available: $487,350.00

Allocation: $150,000.00

Remaining after Priority 1: $337,350.00

Priority 2 Calculation - Debt Service Reserve:

Target Balance: $200,000.00

Current Balance: $125,000.00

Shortfall: $75,000.00

Available: $337,350.00

Allocation: $75,000.00

Remaining after Priority 2: $262,350.00

Priority 3 Calculation - Operating Expenses:

Required: $15,000.00

Available: $262,350.00

Allocation: $15,000.00

Remaining after Priority 3: $247,350.00

Priority 4 Calculation - Liquidity Reserve:

Target Balance: $100,000.00

Current Balance: $75,000.00

Shortfall: $25,000.00

Available: $247,350.00

Allocation: $25,000.00

Remaining after Priority 4: $222,350.00

Priority 5 Calculation - Excess Distribution:

All prior priorities satisfied

Available for distribution: $222,350.00

Allocation: $222,350.00

Remaining after Priority 5: $0.00

Waterfall Summary:

Priority	Purpose	Allocation
1	Senior Interest Payment	$150,000.00
2	Debt Service Reserve Funding	$75,000.00
3	Operating Expenses	$15,000.00
4	Liquidity Reserve Funding	$25,000.00
5	Excess Distribution	$222,350.00
TOTAL	Cash to be Swept	$487,350.00

Stage 3: Instruction Generation (Cash Agent Instructions)

Transfer Instructions - November 15, 2025 Daily Sweep

Instruction #1:

Instruction ID: SWEEP-20251115-001

Source Account: 1234-5678-COLL (Collection Account)

Destination Account: 9999-8888-LENDER (Senior Lender)

Amount: $150,000.00

Value Date: November 20, 2025

Priority: 1

Reference: "Senior Interest Payment - November 2025"

Waterfall Tier: Priority 1 - Debt Service

Instruction #2:

Instruction ID: SWEEP-20251115-002

Source Account: 1234-5678-COLL (Collection Account)

Destination Account: 1234-5678-DSR (Debt Service Reserve)

Amount: $75,000.00

Value Date: November 15, 2025

Priority: 2

Reference: "DSR Replenishment - Target $200K"

Waterfall Tier: Priority 2 - Reserve Funding

Instruction #3:

Instruction ID: SWEEP-20251115-003

Source Account: 1234-5678-COLL (Collection Account)

Destination Account: 1234-5678-OPER (Operating Account)

Amount: $15,000.00

Value Date: November 15, 2025

Priority: 3

Reference: "Monthly Servicer Fee - November 2025"

Waterfall Tier: Priority 3 - Operating Expenses

Instruction #4:

Instruction ID: SWEEP-20251115-004

Source Account: 1234-5678-COLL (Collection Account)

Destination Account: 1234-5678-LIQ (Liquidity Reserve)

Amount: $25,000.00

Value Date: November 15, 2025

Priority: 4

Reference: "Liquidity Reserve Replenishment - Target $100K"

Waterfall Tier: Priority 4 - Reserve Funding

Instruction #5:

Instruction ID: SWEEP-20251115-005

Source Account: 1234-5678-COLL (Collection Account)

Destination Account: 1234-5678-DIST (Distribution Account)

Amount: $222,350.00

Value Date: November 15, 2025

Priority: 5

Reference: "Excess Cash Distribution - November 15, 2025"

Waterfall Tier: Priority 5 - Distributions

Instruction Summary:

Total Instructions: 5

Total Transfer Amount: $487,350.00

Source Account Final Balance: $0.00 (fully swept)

Calculation Timestamp: November 15, 2025 at 2:03 PM ET

Instruction Package ID: SWEEP-PKG-20251115-DAILY

Delivery Method: Secure API transmission to First National Trust Company

Projected Post-Sweep Account Positions:

Account	Pre-Sweep Balance	Sweep Movement	Post-Sweep Balance	Target Balance	Status
Collection Account	$487,350.00	-$487,350.00	$0.00	N/A	Fully Swept
Debt Service Reserve	$125,000.00	+$75,000.00	$200,000.00	$200,000.00	Target Met
Liquidity Reserve	$75,000.00	+$25,000.00	$100,000.00	$100,000.00	Target Met
Operating Account	$8,500.00	+$15,000.00	$23,500.00	N/A	Funded
Distribution Account	$2,100.00	+$222,350.00	$224,450.00	N/A	Excess Funded

Processing Time: 12 seconds from reconciliation data to final instructions

Result: Complete instruction package delivered to cash agent for execution, with all waterfall priorities satisfied, reserve targets met, and excess cash properly allocated for distribution.

Implementation Process

Cascade follows a structured onboarding approach for Cash Management services:

Step 1: Facility Structure & Waterfall Discovery

Initial consultation to understand account structure and cash flow requirements

Review of loan agreement waterfall provisions (Section 7, schedules, exhibits)

Identification of all facility bank accounts with account numbers and banks

Documentation of reserve requirements, minimum balances, and target levels

Collection of cash agent information and instruction delivery requirements

Step 2: Business Rules Configuration

Translation of loan agreement waterfall into systematic calculation logic

Configuration of priority sequencing and conditional rules

Development of validation checks for minimum balances and transfer limits

Setup of account routing specifications for each waterfall tier

Creation of exception handling logic for shortfall scenarios

Step 3: Integration & Instruction Format Design

Integration with Bank Account Reconciliation for cash position data

Configuration of sweep frequency and timing (daily, weekly, monthly)

Development of instruction format specifications for cash agent consumption

Setup of secure transmission method (API, SFTP, portal)

Creation of reporting templates and audit documentation formats

Step 4: User Acceptance Testing

Processing of test sweep cycles with historical account data

Validation of waterfall calculation accuracy against manual calculations

Review of instruction format and delivery to cash agent

Testing of exception scenarios (insufficient funds, covenant breaches)

Training on sweep review, override capabilities, and reporting tools

Final sign-off and go-live preparation

Conclusion

Cash management is the operational engine of structured finance facilities—ensuring that cash flows through complex account structures according to precise contractual priorities. Traditional manual processes force finance teams to choose between calculation accuracy and operational speed, creating bottlenecks that delay fund movements and introduce error risk.

Cascade's Cash Management solution eliminates this trade-off through intelligent automation. Built on the foundation of reconciled cash positions from Bank Account Reconciliation, the platform automates waterfall calculations and generates precise transfer instructions for third-party cash agent execution—removing manual calculation work while maintaining critical separation of duties.

The result is a win-win:

Lenders gain confidence that contractual waterfall provisions are applied accurately, with complete visibility and audit trails

Originators gain operational efficiency and accelerated access to distributable cash without manual calculation burden

Both gain transparent, error-free fund movement processes with proper controls and comprehensive documentation

In today's structured finance landscape, operational efficiency and control integrity are not competing priorities—they must coexist. Cascade provides the technology infrastructure to deliver both, enabling facilities to scale while maintaining rigorous accuracy and compliance in cash management operations.