How treasury management tools can improve a company’s cash flow

A company’s internal cash flow issues can be linked to several problems. Receivables that come through late because of slow-to-pay customers, increased expenses from a company expansion or a line of credit that has been decreased or eliminated are all factors that can contribute to a liquidity crunch within a business.

When internal cash flow issues arise, companies might react by slowing down their payment cadence to vendors. They might have difficulty adhering to payment terms with vendors, which can lead to the loss of discounts offered for timely payments. If they’re slow on their payments to their bank, they could incur fees or have their interest rate increased, all of which can make a tough situation even more difficult. In more extreme cases, cash flow issues can lead to companies having trouble making payroll.

Fortunately, says Jennifer Bidlingmyer, director of treasury management sales at Premier Bank, there are banking solutions that can help.

Smart Business spoke with Bidlingmyer about how treasury management services can improve cash flow and mitigate risk.

What are some examples of treasury management services and their impact?

Treasury services are one way of helping companies improve efficiency and avoid some of the cash flow challenges they can experience. For example, outside of traditional checks or ACH wires — billables that are paid at the time of presentment — layering in lines of credit or purchasing cards may extend a company’s cash flow cycle. From a liquidity standpoint, lines of credit and tools such as automated sweeps can utilize investment cash for operating cash flow.

Expanding payment options for their customers through services like merchant processing can help a company get its receivables quicker, as can a vendor campaign to convert checks to ACH payments. In that vein, companies should take a look at their payment terms with customers and consider implementing discounts for those that submit their payments on an escalated schedule. Accepting credit cards as payment may involve a fee, however the benefit on both sides of the transaction can help companies avoid falling into a cash flow crunch.

Companies can also protect their cash flow with prevention services such as positive pay, which helps minimize any funds going out of the account that aren’t authorized.

Why might companies work without these tools?

Despite the ability of treasury management tools to improve cash flow, some companies may not leverage their potential because it involves change. A good banking partner can provide a roadmap that outlines which tools would have the greatest impact and a plan for their implementation. This can be done by starting with a single service to get a feel for it before progressing to additional tools. Sometimes the fear of the unknown stands in the way of clearly seeing the tool’s benefits. But once a treasury management tool is implemented and can be utilized through a few cycles, businesses recognize the improvements.

It’s important for companies to keep an open mind when it comes to technology upgrades as they can help streamline business operations.

How can a banker help?

Businesses should consult with their banker about options that can help them address cash flow issues and minimize fraud exposure. Together they can review and assess challenges and identify any seasonality to their receivables, or when the company tends to be more strapped for cash. Often a solution is working specifically with their larger vendors and customers during certain times of the year. But, bigger picture, the consultation can be used to gain a better understanding of their payable and receivable structure and how to best improve their position. That will lead to recommendations from the banking partner regarding how a company can layer in some treasury management tools or credit products to help extend their cash flow cycle.

Bankers work with many companies across industries and have likely helped others deal with the same issues. Whatever the pain points might be, a banker can offer their assessment and likely has a solution that could help. ●

INSIGHTS Banking & Finance is brought to you by Premier Bank

Jennifer Bidlingmyer

Director of treasury management sales


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