How to Manage Your Cash Better
An introduction to cash management services available from banks for most businesses
AP
Skip the bank line: Remote deposit allows you to scan and deposit checks online anywhere you have a computer and an Internet connection
You may not have noticed, but a revolution has occurred in business banking. Cash management (also known as treasury management) services, which were until recently available only to big companies from big banks, are now available to most businesses, from many more banks.
Cash management tools, says Bob Seiwert, a senior vice president of the American Bankers Association, are designed to help "get the money in quickly but not pay it out until you absolutely have to" -- a tried-and-true cash-flow strategy. They have also made the job easier, providing a real-time window on cash flow and automating many tasks that were previously tedious or time-consuming or both.
These pages will introduce you to the most compelling of the cash management services. Though fees can vary from bank to bank, these services are generally not loss leaders for them, and some can be expensive. Bundling may save money (see "Pricing Cash Management"), but, in some cases, you may find better deals from independent providers. Finally, remember that cash management is just one aspect of a banking relationship. Once you have invested time setting up accounts and automating transactions, you will be reluctant to switch banks and do it again. So if you plan to seek a loan, make sure you are banking with an institution that may be inclined to give you one.
Banking Online
1. Receivables
Electronic ACH collections. In recent years, financial firms have opened up the industry's electronic network, known as the Automated Clearing House, to clients. You can arrange to automatically debit a customer's bank account (with the customer's permission), and the money is routed to your bank account in 24 hours. ACH collections are particularly useful for setting up automatic recurring payments. Fewer banks offer small companies inbound ACH services than outbound services (see "Payables"), but a handful of independent firms, such as First ACH (firstach.com), do.
Remote deposit. This allows you to scan and deposit checks online anywhere you have a computer and an Internet connection -- saving you the time and energy of making regular runs to the bank. The bank provides a specialized portable scanner, often for free. However, for the service itself banks typically assess a monthly fee plus a charge for each deposited check.
Merchant credit card processing. Many banks offer to settle credit card payments for merchants, and the competition is so intense that most processors "would sell their grandmother for five basis points," says David Robertson, publisher of The Nilson Report, which follows the credit card industry. There is no inherent advantage to relying on your bank for the processing, he says, unless it happens to be the cheapest or is bundled with other services at a discount. Besides price (see "Pricing Cash Management"), Claudia Volk, a treasury management consultant in Falls Church, Virginia, suggests considering how quickly the processor will put the money into your account and the detail of the reporting -- you should be able to identify all the transactions processed each day so that you can reconcile them with your accounts receivable system.
2. Payables
Electronic ACH payments. Most banks offer businesses the ability to set up debit transactions online and specify the payment date, which can be in as little as 24 hours, ending the uncertainty over when a payment will clear. (More expensive wire transfers are required for same-day transactions.) Businesses can use ACH payments for, among other things, vendors, direct deposit payroll, and taxes. (Some banks market separate services for direct deposit and tax payments.) Banks may offer a less-expensive service, often called bill pay, that promises settlement within two to five days.
Payroll cards. For businesses with employees who can't afford checking accounts, a reloadable payroll card program is an alternative (or complement) to direct deposit or paper checks. Payroll cards are offered primarily by big banks, but the American Bankers Association and MasterCard have launched a program through which community banks can market cards as well.
Positive pay. With this fraud-prevention service, you transmit to the bank a list of checks you have issued. If a check presented to the bank for payment isn't on the list, you can accept or reject it. (Alternatively, in reverse positive pay, the bank furnishes you with a list of checks presented.) Treasury management consultants recommend this service unreservedly. "It's building the moat around the castle, for just another couple of pennies a check," says Ken Parkinson of Treasury Information Services in Hopewell, New Jersey. In fact, "a lot of banks are saying, 'Buy positive pay, or indemnify us from the risk of a fraudulent item being presented,' " says Dave Robertson, partner at Treasury Strategies, a Chicago consultancy. Large banks are extending positive pay protection to ACH payments as well.
Multipurpose credit cards. Credit cards can now be tools for managing, as opposed to simply making, business purchases. Company controllers can set credit and transaction ceilings for individual employees and designate categories of off-limit merchants. Statements consolidate transactions into spending categories to permit broad payables tracking and forecasting but can also monitor each card user, and purchases can be uploaded to your accounts payable records.
