Far more than just check scanners and online banking, cash management is a large umbrella that encompasses managing the whole financial piece of your business, including mobile applications with real-time information, bill pay, automatic reconciliation, merchant services, payroll and HR management.
“If cash management is done well, it can attract more customers or business,” says Bonny Carroll, assistant vice president, Cash Management, First Federal Lakewood. “When customers know they are going to be paid in a timely fashion and the right information will be provided, it leads to great partnerships.”
“Cash management is vital to all businesses’ success because of the efficiencies and protection it provides,” says Matthew Lay, vice president, commercial relationship manager, First Federal Lakewood. “You know exactly where your business stands financially, which helps you plan for future growth.”
Smart Business spoke to Carroll and Lay about best practices for cash management in your organization.
How can businesses better use cash management solutions?
Companies need to be proactive. Unfortunately, most consider a cash management solution like positive pay or fraud protection only after they’ve had a problem. Treasury management needs to be a priority. An annual review of cash management tools as well as where the company can improve is critical.
Business owners also make decisions on collection or credit card products without a comprehensive review of the available options. Some key services companies should include are credit cards that are set up with next-day deposits, a payment system that offers rewards to repeat customers and receivables that are updated automatically.
Your banker has deep expertise in business banking and can educate you on all of the services available. By leveraging best practices from similar businesses, he or she can offer insight into which solutions might meet your business needs most effectively.
It’s important to remember that the option that appears least expensive may cost you more on the back end. For instance, some merchant service solutions don’t transfer funds for three or four days and updates may not integrate with your internal system or checking account. Timely reconciliations update the entire business process, which allows you to monitor your accounts in real time and reduce the likelihood of fraud.
What trends are you seeing in the industry?
Check transactions continue to decline in favor of automated payments via electronic payment or credit cards. It’s safer, because one of the greatest fraud risks is your bank account information on checks. With an electronic payment, vendors don’t have access to that information.
Merchant services and credit card payments are more acceptable at all applications, including paying discretionary expenses, as companies take advantage of discounts. Credit cards will likely become even more popular as chip and pin cards become more ubiquitous. Later this year, chip card technology will be the new global standard for debit and credit card payments.
Another emerging trend is conducting business via mobile devices — using phones to approve wire transfers, transfer funds between accounts, make deposits, etc. Banks also are providing security awareness training and recommending controls for those who take advantage of online and mobile applications.
As technology use grows, has cash management become less personal?
Online cash management services help keep you connected to your financials, but that doesn’t mean it’s any less important to have an ongoing dialog with your banker.
You need to communicate regularly to explain your business processes so you can get advice on how to mitigate risk, internally or externally, and how to introduce additional efficiencies with cash management products. It’s also important to meet with your banker to understand new technology and best practices they have employed with similar business clients.
The right banker takes time to know your business, establishes a partnership with you to ensure your data remains secure and recommends banking products, services and solutions that can help your business grow.
Insights Banking & Finance is brought to you by First Federal Lakewood
