It used to be that small businesses were
at a disadvantage when it came to being
able to afford the newest technology.
The exorbitant costs of that technology,
combined with the limited resources of a
small business, limited its ability to purchase software that would help it run more
efficiently.
“The whole industry has evolved to the
point where it’s become less expensive for
the consumer,” says Will Thatcher, vice
president and affiliate head of the Greater
Cincinnati Business Banking Division,
Fifth Third Bank. “It has moved the price
point down to where the small business
person has been able to take full advantage
of some of these products.”
In Part I, Smart Business asked Thatcher
about how this software has allowed businesses to run more efficiently and keep a
sharper eye out for fraud. Part II next
month will look at returning deposited
items back to customers on a CD-Rom and
fraud as it relates to credit cards.
How has technology helped improve the
banking industry?
Approximately 20 years ago, the industry
developed a cash management product
called Controlled Disbursement. It
informs a customer in the morning which
checks would clear later that evening on
their account. Since it was relatively new
technology it was also quite expensive;
along the lines of $500 a month for each
account, plus the cost of each item clearing
the account.
Over time technology has improved.
Through CDD you know how much money
to leave in your account to cover your
checks. You can invest the extra balance
into interest-bearing accounts or pay-down
your debt with the bank and reduce your
interest expense. It’s a way to maximize
your dollar and gain knowledge as to what
is coming in daily.
How much have prices come down for the
software?
Right now it’s probably about 20 percent of what it was when it was introduced,
which means the cost is about $100 a
month or lower. Part of the reason it’s less
expensive are advances the industry has
undertaken in creating a more efficient
delivery portal. The portal makes the information available through the banks’ Web
sites.
The distribution process is so much easier. Before you had to fax the information
over every morning or dial-up to a site that
was owned by the bank. It was cumbersome and some times the sites crashed. As
technology has advanced not only has the
speed improved, but so has the accuracy,
timing and reliability of the transfer of the
information. Customers are paying less
money for faster information simply
because of the on-line sites. Reduced price
and ease of use have made this automated
tool so much better.
Have other automated tools improved with
technology?
Sweep products, such as an interest-bearing sweep that sweep excess balances into
an interest-bearing vehicle or a credit
sweep, that sweeps money over every day
to pay down debt are more affordable today. Twenty years ago they were labor-intensive and cost around $200 a month to
be done inside a bank. Today you can set
up a sweep to go either way or to sweep
into an investment so that you can maximize your opportunity to save or make
more money.
On the deposit side, each month you can
have your bank automatically reconcile
your checking accounts or have your
payables reconciled to your own internal
accounts payable system. What used to be
done as hands-on or phone call-oriented is
now done on the computer.
What about fraud protection?
Whether it’s a person stealing from inside
the company or someone posing as an
employee on the outside and trying to get
inside, there are several things being done
to help prevent it.
Inside a company, typically a small one,
there’s one person who handles all the
activity on the financial end. This trusted
individual will write the checks and make
the deposits and what we found is that
many times the customer can not afford
the appropriate internal controls, which
may lead to an embezzlement.
One solution is to send the company
receipts to a lock box The bank will then
make your deposit for you and the cost of
the box, which used to be in the hundreds
of dollars a month, is today around $80 a
month.
So when you’re talking to someone in a
company with a couple of million dollars a
year in sales you can tell them that it’s an
internal control value. You don’t have to
hire another person or waste time going
back and forth to the bank.
But what you also get is someone taking
care of your deposits for you so that you
know the deposits are there. The bank will
empty out your lockbox several times a
day, seven days a week.
Watch for Part II next month.
WILL THATCHER is vice president and affiliate head of the
Greater Cincinnati Business Banking Division, Fifth Third Bank.
Reach him at (513) 534-7037 or [email protected].