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

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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.

Porter, who had some doubts about whether Falcon was large enough to justify the use of a cash management service, is particularly pleased that he knows, on a day-to-day basis, the status of his company's cash flow without having to call Falcon's branches. "I get consolidated information through one phone call, and by 9 or 10 in the morning I know what funds are available to each branch and what's available to invest."

Calvert's Inc. is a discount retail clothing outlet in Needham Heights, Mass. Almost a year ago, the store chose the balance reporting service of the First National Bank of Boston's BostonLink. (Like First F.A.C.T.S., BostonLink is a system licensed through Chemical Bank.) Calvert's also arranged for its other bank -- BayBank Norfolk County Trust Co. (also a Chemical Bank licensee) -- to report the store's account information to BostonLink. The BostonLink computer provides Calvert's with a synthesized voice telephone report each morning on balances and related information -- debits and credits, for example -- for its four accounts at both the BayBank and First National. "We're able to keep track of our balances in a more effective way," says Richard Walczewski, company comptroller. "We know what our balances are according to the bank, in addition to our books, so we can judge our cash situation on a day-to-day basis."

As a retailer, explains Walczewski, the store makes several deposits daily -- a number of which are customer checks that can take two or three days to clear. "Now I know every morning how many deposits have gone through and which checks have cleared," he says. "So I know what's available for investments and disbursements."

Walczewski is also able to keep close tabs on the store's debits. "If you have $100,000 in the bank, even if you write $90,000 worth of checks," he explains, "by watching the account closely, you can put that $100,000 in an interest bearing account because you have two days to work with. You can play that float until the checks clear."

Before Calvert's started with BostonLink, Walczewski would have to make phone calls to each bank every day to get information on the company's account, and "the information was not as readily available as it is now," he says. "There were times when I would have to wait until 1:00 and it might be too late to transfer funds or make an investment. Now I know exactly what's available in the morning and can instruct the bank to make a wire transfer from one account to another immediately."

Within 18 months, Calvert's -- which pays for balance reporting by maintaining a certain balance in its account at First National -- plans to have its own computer terminal that will hook up directly to BostonLink. This will enable the company to do wire transfers inhouse and call up balance information on a video display screen.

Genesys Software Systems Inc. in Lawrence, Mass., has been in existence since June of 1981 and has projected sales of $3 million to $3.5 million for its first year. It's also a BostonLink customer. A spin-off of Wang Laboratories, Genesys designs and sells human resource management computer software. Says chief financial officer Robert R. Pomerleau, "As soon as we opened our account at First National, we said, 'What can we do to better control our situation?"

Genesys elected BostonLink's basic balance-reporting service to get daily information such as the previous day's closing collected balance and one- and two-day float. The company also uses a lockbox service: Customers make payments directly to First National using a lockbox number so that Genesys's account is immediately credited. Before they started using this service, customer payments were mailed to Genesys, then sent by the company to the bank, again by mail, for deposit. "Our account is credited three or four days faster using the lockbox service," says Pomerleau. "It eliminates the lag and helps our cash flow." The bank gives Genesys a report -- either by telephone or by terminal -- on the amount credited to the company's account through lockbox payments. The company will soon take advantage of a new service offered by the bank, which will provide more detail on lockbox activity -- identifying customers that have paid, for example. "This should help on collection procedures," Pomerleau says.

With the direct dial-up to BostonLink "we know at all times what cash we have on hand," says Pomerleau. Then, through an investment service offered by the bank, "we can invest and earn interest." Pomerleau calls First National's investment department, for example, with instructions to transfer excess funds from checking into an interest bearing account. The bank will also invest the money in short-term securities, says Pomerleau. "We're certainly increasing our cash flow," says the fledgling company's chief financial officer, "because we're making the best of our money. That's the objective."