By Tom Snapke
Managing working capital and cash flow can be a complex endeavor. However, utilizing your financial institution’s cash management resources can help you streamline the process.
Your banking partner can help you manage cash resources, accelerate collections, manage the payment cycle, reduce administrative concerns and mitigate fraud risk. Identifying how to accelerate collections and reduce expenses and disbursements by electronic means can even help you invest idle balances or pay down credit facilities.
Businesses do not have to invest in software packages to accomplish this. Banks have already invested in the technology to bring information to their clients quickly and accurately so companies do not have to hire additional staff or make investments in technology.
Here are a few ways cash management technology can help businesses better meet their banking needs.
Through advances in technology, businesses are able to quickly communicate financial information to and from their financial institutions. With the advent of remote deposit capture and mobile deposit, many companies are taking advantages of later deposit windows, simplified deposit creation and better record keeping.
Companies are now operating with fewer resources and oftentimes are not able to drive to the bank daily to make deposits. Checks sitting in a drawer don’t help cash flow and availability of funds; those checks need to be in the account and quickly processed through the system for collection.
Remote deposit capture and mobile deposit allows extended deposit cutoff times for same-day ledger credit and the convenience of scanning and/or depositing checks electronically from your office. This eliminates the need for your employees to drive to a branch in inclement weather and the liability of an accident, as well as unproductive time away from the office. In addition, a company with several locations can consolidate its banking relationships even if a bank is not located in the same geographic area.
Remote deposit capture provides quality control and data can be exported directly into your accounting system. With this image technology, businesses also have access to previous copies of transactions. Time and paper are saved because deposit tickets are not needed and a one page report identifying the day’s deposit is available.
Companies with a smaller number of checks to deposit can utilize mobile deposit which is readily available on most financial institutions mobile apps. Mobile deposit offers the same convenience without the need to purchase a scanner. Many companies use both remote deposit capture and mobile deposit.
Reducing the cost of printing checks and the manual processing of paper items by using electronic, or Automated Clearing House (ACH) payments, can save money, as well as time. The most common use is for direct deposit of payroll, but there is an increase in the number of businesses that are focused on ‘going green’ and reducing costs associated with check stock, envelopes and mailings.
In addition to a robust ACH system, banks also offer an online bill payment service. Bill payment offerings in the past were reserved for consumers, but now commercial clients are becoming more comfortable with the service and leaving ACH or check issuance to the bank.
Companies need to review their internal security and checks and balances policies. The bank puts control in the hands of the business — banks provide information through a highly secure website to a system that accommodates an unlimited number of users, and an administrator at the business can establish access and permission levels. By creating different access levels, the accounting staff has the ability to enter transactions so managers can review and approve them online. Each user’s identity is verified and companies can instantly add or delete employees when needed.
Positive Pay is a service whereby the company provides a check issue file to the bank with check number, payee and dollar amount when the checks are released. As those checks clear, the bank matches the items to the issue file the business sent. A similar process also works with ACH transactions with ACH blocks and filters.
If an item does not match, this is considered an ‘exception item’ and an alert is sent to the business advising it that it needs to review the item online and make the decision to pay or return, usually by 1 p.m.
Typically, the default is to return the item if the company does not give direction: It is presumed the item is fraudulent because the business did not advise it issued that check or authorized the ACH. In this manner, the business and bank work together to catch fraud before it hits the account.
These services can be implemented by your bank’s cash management professionals and will most certainly help your organization operate efficiently and decrease costs.
Tom Snapke is a First Vice President and a Certified Treasury Professional (CTP) at First State Bank. Reach Tom at 586-445-4849 or firstname.lastname@example.org.