It's 9 A.m. Do You Know Where Your Cash Is?

Automated cash management systems can answer that question -- and help you make the most of your money.

Volatile interest rates, inflation, and uncertainty over the economy in general have made even highly profitable businesses look for ways to make the most of their money. And one way to do that, many companies have found, is through an automated cash management system. These services, typically offered by banks, provide business customers with timely information on their bank accounts' activity and the current status of their cash flow. The information on balances and transactions can lead to more informed, more profitable financial decisions.

"Any company with cash turning over constantly and with an average daily balance of at least $150,000 can certainly take advantage of automated cash management services," says Karl Auch, controller of MP Industries Inc., a plainting contractor in Baltimore with sales of about $8 million. About a year ago, James Markakis, vice-president of the company, decided to take advantage of the balance reporting service offered through First F.A.C.T.S., an automated cash management system licensed to the First National Bank of Maryland by Chemical Bank in New York. (F.A.C.T.S. stands for Financial Account Control and Transaction System.) Chemical's system or some other, similar system are available in most metropolitan areas. Sometimes the systems are offered by only a few banks in an area and are not widely promoted, but the number of banks offering the systems increases every month.

Through a touch-tone phone linked to the bank's computer, MP gets a daily report on its balance activity for the previous day. Every morning at about 9:30 Auch "dials" the computer via the telephone, using an assigned code number. A synthesized voice gives him information such as gross and collected balances, number and total amount of checks cleared, total number and amount of deposits, and float.

"We know our balances daily," says Markakis, "so we know what's available to invest." MP and the bank have agreed upon a target balance that must be maintained by the company. The interest from this account reimburses the bank for maintaining a separate cash management account for MP. "The money above the target balance is eligible for interest income and can automatically be transferred by the bank into our cash management interest-bearing account. Before we used this system, that money would just sit in the regular checking account and earn nothing," Markakis says. MP would sometimes use its excess cash to invest in certificates of deposit, "but this works out better," claims Markakis.

"With commercial paper," says Auch, "very often you have to tie that money up for at least 30 days. Now that we know the daily availability of our cash, we're able to invest overnight and have that money back with interest by 9:30 the next morning." MP maintains a target daily balance of $150,000. Anything above that is invested, and Auch estimates the average daily interest yielded is $400. As for the advantages of such a system, Auch says: "If you have a cash broker, there are fees involved. Through the bank, there's no extra cost. And there's the daily availability of cash to invest."

Falcon Corp., an $18-million wholesale electrical supply company with headquarters in Ocala, Fla., decided to use an automated cash management service "to speed up the time it takes to receive funds from branches so that the money is available to us for our cash flow purposes," says Austin Porter, executive vice-president. Falcon has five branches throughout Florida and three outside the state. "We needed better control of our funds at different branch locations," Porter explains. Falcon chose the automated cash management services of the Barnett Banks of Florida Inc. This corporate cash management service is delivered to Barnett through the time-sharing network of National Data Corp., a service organization in Atlanta.

To qualify for the service, Falcon maintains a target balance account at the bank. Falcon has two accounts -- one depository, the other checking -- for each of its branches. In addition, the company maintains a master account in Ocala.The local depository and checking accounts of each of Falcon's five branches always has a zero balance, Porter explains. Any time a check is written at a branch location, funds are automatically transferred from the master account in Ocala to the local Barnett branch account so the check will clear. "We've alleviated the problem of having one branch sitting with money while another branch, or the parent company, is out borrowing money. So we've been able to cut down on paying high interest rates," says Porter. He receives a daily report through a telephone link with Barnett's Jacksonville branch and computer; it includes information such as master account balances, float, and total availability of funds.

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