How can you tell when it's time to overhaul your cash-management system? Besides the obvious reasons -- skyrocketing revenue growth, for instance -- there are plenty of other warning signs. Here's a checklist from Larry Marks, president of Sagner/Marks, a financial consulting firm based in Chicago:
1. Low "interest" rates. "Banks pay an 'earnings-credit rate' on corporate deposits; it's comparable to an interest rate, except that it's basically a credit toward their service fees. If your rate has dropped so low that it doesn't really count anymore, consider reducing your cash balances and paying higher fees instead, since you can write them off against your taxes."
2. Poor forecasting data. The bottom line is your ability to accurately and easily forecast how much cash you've got today and how much you'll need today, and your ability to move cash to exactly where you need it to be. Can't do that well? Set up a new system.
3. Too many authorized signers. "Small companies often authorize too many people to approve cash transfers, small loans, and so on. That opens the door to fraud or mismanagement. Allow only one person to approve bank transactions."
4. Excessive costs. If your account fees are low, but overall costs are ridiculously high because of extra charges from bounced checks, stop payments, or whatever, shop for the lowest-cost bank system based on your actual business needs.
5. Account-analysis statements. "Most small companies don't know what these are, so they don't ask for them. Start asking. They're the bank's price for the actual costs of servicing every transaction during a given month -- and it's impossible to evaluate whether you're being overcharged or mischarged unless you receive it and read it regularly," says Marks.* * *