Every business owner knows that one day they will exit their business either on their own accord or involuntarily. However, many fail to properly prepare for their departure. One issue that every business owner should address as part of their exit strategy is how to maintain their current standard of living upon exiting their enterprise.
Early in the exit planning process it is important to develop a contingency plan for the business and assemble a team of advisers who can help identify strategies to meet your personal financial goals.
“The cost of hiring a team of experts is typically recovered several times over through the benefit of the increased selling price of your business and maximum personal financial security,” says Sandro Rossini, senior vice president, regional manager of Wealth and Institutional Management at Comerica Bank.
Smart Business spoke with Rossini about how business owners can most effectively transition into a comfortable retirement, the importance of having a customized financial plan in place and what type of service and performance standards one should expect from investment professionals.
What’s the first piece of advice you would give to founding owners about exiting their business?
The first step is to determine who is going to run the company upon the founder’s death, disability or retirement. If a decision is made to exit the business, the founder must decide between liquidating the business, selling the business to a non-family member or maintaining ownership of the business within his or her family. One-third of businesses don’t get passed along to the second generation. If you want the business to remain in the family it is important to evaluate the capabilities and interest of your children. This process can never be started too early.
How can a business owner most effectively transition into a comfortable retirement?
Just as an owner might hire a team of professional advisers, such as engineers, attorneys and CPAs, to build a successful business, it is important to hire a team of professionals to build a solid personal financial plan. The first step is choosing a financial planner.
Upon exiting a business, why is it so important to have a customized financial plan in place?
The main reason is so that you can maintain your standard of living. By having a plan in place, financial strategies can be developed to establish cash flow and reduce the tax impact of the sale of your business. It is critical to develop a customized financial plan because everyone’s financial circumstances are different. One person might have all of his net worth tied up in his business, with no other assets to speak of, while another person might have significant assets outside of her business. A certified financial planner can help you customize your plan so it meets your specific objectives.
Why is it important to get outside help when planning a financial strategy?
Switching from earned income to investment income is a whole new way of living. You are shifting expenses, such as for cars, travel and entertainment, from corporate expenses to personal expenses. This requires a complete evaluation. Working with a business broker, business attorney, CPA, financial planner and investment adviser should be part of your strategy.
What type of service and performance standards should one expect from investment professionals?
It is best to start with an evaluation of all your options with multiple professionals. Getting a referral from a trusted colleague that has gone through a business sale is always a good way to start. You should expect the planning process to be intense and require multiple meetings. All of the professionals you are working with should provide you with plenty of attention and be thoroughly committed to meeting your needs.
It is important to understand the compensation structure of the individuals with which you are working. For example, many stockbrokers carry the certified financial planner, or CFP, designation but are compensated only when you purchase a product from them, whereas other certified financial planners charge a fee and may not have the incentive to sell you a particular product. Part of setting your performance standards involves understanding what motivates your team.
SANDRO ROSSINI is senior vice president, regional manager of Wealth and Institutional Management at Comerica Bank. Reach him at (415) 477-3212 or email@example.com.
While successful business owners spend a great deal of time building wealth through their ventures, many do not properly protect their assets by having a business succession plan in place. Allocating the necessary time and resources to create a succession plan, in which you address how you would handle the premature departure of a partner, can pay huge dividends in the future.
“You have to ask yourself a number of questions, including: If my partners die or become disabled what do I want to happen? How do I want to buy them out?” says Christopher Lapple, vice president, regional insurance consultant for Comerica Insurance Services.
Smart Business spoke with Lapple about business succession plans, specific strategies that can be implemented and the importance of obtaining an accurate business valuation.
Why is it so important to have a business succession plan in place?
There are business owners that have worked 30, 40 years to build their business, but they have no plan in place to buy their partner out in the event that he or she dies, becomes disabled or retires. Only about 20 to 30 percent of closely held or privately held businesses actually have a written business succession plan in place that is funded.
There are several different ways to fund a succession plan, with life insurance generally being the most cost-effective method. Without life insurance, the options are either borrowing money from the bank and paying interest or utilizing operating profits, which hurts business profitability.
How far in advance of an anticipated departure should business succession planning occur?
There are no anticipated departures, except for retirement. No one knows when someone will die or become disabled and will never be involved with the business again. You have to plan for the worst-case scenario and ask yourself, ‘How am I going to buy out my partner’s business interest if he dies or is disabled tomorrow?’ The time to plan is now. Drafting a written plan with your business planning attorney is essential. Your plan must address all possible departures, planned or unplanned. Some owners may even address the loss of a professional license as a buy out trigger. In addition to the three obvious buy out situations, there may be areas that are critical to address simply because of the uniqueness of the business.
What are some scenarios involving a partner that make succession planning especially critical for closely or privately held businesses?
Further complicating a buy out situation, the surviving partner(s) may be faced with a loss of partner talent or expertise. More than likely, he or she is an integral part of the business and has significant knowledge in a specific area that can’t be replaced immediately. For example, one partner may do all of the marketing and sales or has a highly skilled engineering background that might be difficult, if not impossible, to replace. You have to look at each partner individually because everyone brings something to the table. There are some cases where people within an organization are cross-trained, so losing a partner won’t have as much of an impact, but usually partners complement one another in terms of knowledge, skill and expertise.
What strategies can be incorporated into a business succession plan to address the departure of a partner?
Most people choose to pay an insurance premium using pennies on the dollar and leverage the money into a death or disability benefit. This allows your succession plan to be immediately and fully funded for these events and transfers the risk to the insurance company. The money is then certain to be there upon any of these triggering events.
How should the valuation of a business be determined?
It is critical to have a valid, reasonable accounting of what your business is worth on the open market. You need to get a business valuation from a valuation specialist or a ballpark figure from your tax accountant or CPA. A lot of people use a gut feel for what they can get for their business, but a business valuation expert will value your business by a number of different methods, including book value, capitalized earnings or recent comparable sales in the market. This will also mitigate any disagreement among partners when death or disability occurs.
How often should a business succession plan be reviewed or updated?
Any time you have a significant change in the value of your business, either upward or downward, you should review your plan. For example, if you know that your net income has doubled, there is probably a strong likelihood that your value has doubled or tripled. The need to review or update your business succession plan could arise every year or every five years; it is really a case-by-case basis.
CHRISTOPHER LAPPLE is vice president, regional insurance consultant for Comerica Insurance Services. Reach him at (310) 712-6789 or firstname.lastname@example.org.
Under a process called eminent domain, the government can take possession and ownership of private property for public use. Typically, the acquired property is used to build or widen roads or to install public utilities like water, sewer, gas or electric lines.
“An experienced condemnation lawyer will be able to identify things that you might not think of as you evaluate the offer, such as what your future plans for the property are and what effects the ‘taking’ might have on your continued ability to comply with things like zoning ordinances,” says Thomas Schultz, partner at Secrest Wardle.
Smart Business spoke with Schultz about eminent domain, how property is valued and the importance of fully understanding a proposed project.
What is eminent domain, and how might it affect one’s business?
Eminent domain is the right of a governmental entity to acquire property from its owner even if the owner is unwilling to sell that property voluntarily, subject to the payment of just compensation to the owner. The agency can only acquire the property if it intends to put it to a ‘public use,’ though exactly what that means can depend on a number of variables, not the least of which is the specific agency that is acquiring the property and the property’s location. Here in Michigan, there are fairly stringent rules about what ‘public use’ means, so property cannot be taken for what has been called ‘economic development’ purposes or for turning the property over to other private property owners to put to a different ‘private use’ that the government might like better.
What should a company do if contacted by a condemning agency seeking to acquire some or all of its property?
First, consult a lawyer. Even if you don’t object to the proposed project or improvement, you should know what your rights are and what the obligations or responsibilities are of the condemning agency. Second, you may also need to contact a real estate appraiser, who can help you understand the value of the land proposed to be taken.
Third, find out all you can about the project and the reason why the agency wants some of your land for this project. The agency will usually explain the project as part of its initial contact with a business, but if the information you get doesn’t seem like it is complete or you don’t think you’re being told everything, there are plenty of places to get additional information. Your local town or city planning department is often a good place to start.
Any other advice for business owners?
Think about what the loss of the property might do to your business, not just right now but years from now. Will it adversely affect accessibility or visibility or expansion plans or the future marketability of the land? Consider whether the offer from the government has taken into consideration all of the information that you have about your property and your business. If not, make sure that such information is properly conveyed to the agency. Make sure you understand the project and that your voice is heard on whether it should go forward. If you do object, object early in the process to protect your rights as best you can. Also, it is important to pay attention to deadlines contained in paperwork from the condemning agencies. Missing a deadline can have serious consequences on the right to receive proper compensation.
How is property valued in an eminent domain case?
Before contacting a business, a condemning agency is required to come up with a value for the property it intends to acquire, and it has to share that analysis with the property owner. Often, that evaluation process includes a formal real estate appraisal. The agency will at some point make a formal offer to acquire the property and negotiations can then occur. If you reach an agreement on the value of the property, the agency will then usually prepare the necessary paperwork to document the transfer of the property upon payment of that amount.
What type of litigation is typically involved?
If the parties can’t reach an agreement, the agency can then file a lawsuit. Assuming you have no argument that the property isn’t in fact going to be put to a ‘public use’ or shouldn’t be taken from you because it is not necessary to do so, then the agency will usually get the title to the property early in the litigation. After that, the focus of the litigation will usually be the amount of compensation that is owed, the fair market value and/or any damages that might be suffered by a business as a result of the ‘taking.’
THOMAS SCHULTZ is a partner at Secrest Wardle. Reach him at (248) 539-2847 or email@example.com.
Nearly every company, regardless of their size, faces the challenge of aligning IT objectives with business objectives. Though the task is difficult, aligning new technologies with business goals can lead to streamlined operations and improved efficiencies.
“Aligning your IT objectives appropriately can help you realize major business objectives that include service-level improvements, cost reduction, compliance, information protection, and business process support and automation,” says Dave Braner, CIO of CIMCO Communications.
Smart Business spoke with Braner about aligning IT objectives with business objectives, what the biggest challenges are and the importance of developing metrics.
Why is it crucial for IT management to align its objectives with the company’s business goals and objectives?
Businesses are changing structurally and operationally in response to new trends in technology and business practices. The role of technology is becoming more and more of a competitive advantage as organizational dependencies on information and data increase. How IT is integrated into the core of a business and the integral relationships required between the IT organization and senior leadership are crucial to the success of a growing organization
As companies become more transaction-based, the value in IT investments grows. IT is no longer a cost-center or stand-alone function. In order to grow a company, IT initiatives have to be tied tightly to key strategic business goals and objectives.
What specific benefits can be realized by alignment?
Successful, properly aligned IT projects create a chain reaction of benefits. Increases in performance can lead to improved customer satisfaction, which, in turn, leads to higher revenue and market share. By basing IT investments on their ability to drive the business forward, not only does the organization’s performance increase but so does the IT department’s overall success.
How should a company get started?
It is imperative that IT management be involved in strategic planning for the business. Once the business’s strategic goals are set, establish a plan in which you translate the overall business objectives into measurable IT services. This allows you to effectively allocate your IT resources and maximize business value with every project you implement. Next, create an infrastructure that allows you to accomplish your planned objectives. Identify key resources, both internal and external, and their alignment so your entire staff can function efficiently. Finally, determine the functionality of each project and measure how it improved operations across the organization. Make sure to take baseline measurements in order to appropriately report significant change.
What are the biggest challenges?
Every business has its own set of unique challenges. Here are some challenges that can touch any IT organization:
- Managing costs: This is always the No. 1
concern. To ensure that investments will
bring the best return, assess the current state
of your organization and its ability to deliver
- Changing metrics: All too often in IT, when
you finally find a pattern, there is a change
and your current metrics become obsolete.
Be prepared to adjust midcycle, as it is
- Understanding requirements: Ensure that
you fully understand internal customers’
needs and the requirements to ease their pain
as well as meet the business’s goals.
- Leadership support: Major infrastructure
changes and enhancements are significant
investments. Senior management may not
always see the big picture and often have
varying opinions about how to spend budget
dollars. Showing direct correlation between
IT initiatives and business goals can help
earn IT funds.
- Poor prioritization: IT project wish lists do
not get shorter. Poorly prioritized projects
can end up costing additional money and
time. Consider time, capital and outcomes
when prioritizing projects.
What metrics are typically used when aligning IT and business objectives?
One of the most important ways to monitor your success is to evaluate your work and show tangible results. Although it is recommended that you develop metrics significant to your organization’s success, there are some standard metrics that can work well for any organization.
- Percentage uptime: How long are your
applications staying up? Consider the times
when the applications are down and how
they affect the function of that application
and the cost per employee during downtime.
- Functionality: What purpose is the application serving, and what process is it improving? Determine whether the project is meeting a purpose for the business.
- Problem resolution: Are user issues being
addressed in an efficient way? Is there one
central location for users to go to for the
application? What is the time to repair for
Metrics should always be tailored to a company and its objectives. Determine what metrics capture the true results of your projects to calculate the return on investment for your organization.
DAVE BRANER is Chief Information Officer of CIMCO Communications. Reach him at (630) 691-8080 or firstname.lastname@example.org.
Every business will hit a rough patch at some point. A company’s momentum can be stunted by a number of factors including an unfavorable economic climate, the loss of a key customer, or disappointing results from a merger or expansion. Regardless of the cause, during trying times, it is important to maximize the relationship you have developed with your bank. By being candid and forthcoming about potential challenges, you put your banking partner in a position where it can proactively identify solutions to meet your needs.
“The ability to maintain a relationship with a financial institution during challenging times will save a company time and money,” says James Wade, first vice president of Comerica Bank.
Smart Business spoke with Wade about how to best maintain a relationship with one’s banker during challenging times, the importance of communication and how to plan an investment strategy during the midst of an economic downturn.
Why is it so important for businesses to maximize the relationship they have with their bank during challenging times?
Having a long-term trusting relationship with a bank’s decision-makers should provide you with a clear understanding of their expectations, which will allow your management to focus on operations versus interviewing alternate sources of financing. If you find yourself in a situation where your bank is not willing to understand your business, especially during challenging times, it may be time to find a new financial partner.
In what ways should companies work with their banker in advance of, and through, economic downturns?
A company needs to choose a financial institution that has a history of supporting its customers through cycles. Look for a bank and a team that has operated through multiple cycles. If this experience is part of the culture of the financial institution, it provides the confidence and patience to support a company through challenging times. Invest the time to develop a relationship with multiple decision-makers in your financial institution when times are good. This strategy will pay off when cycles change.
What role does communication play in sustaining a positive working relationship?
Communication is critical; no one likes surprises. A financial institution and banker deserving of your business will bend over backward to support your company through challenging times, assuming you have taken the time to communicate the good and bad, timely and accurately. A banker who trusts the information you are providing will have an easier time supporting your company during challenging times. However, remember that commercial banks are regulated institutions that have legal requirements and their role is not to fund long-term losses or other equity situations. Banks do have the flexibility to work through short-term problems and may ask for flexibility in return in the form of additional collateral.
How should a company communicate disappointing results to its banker?
Communicate as soon as possible and provide an action plan. Include monthly projections with your plan for a benchmark to operate against. The objective is to agree on a plan so you have the ability to operate your company without wondering how your bank will react. Meet often during these times and provide actual performance comparisons to your plan. If you deviate from the plan, meet with your banker to discuss what happened. It may be necessary to revise your plan if the environment you are operating in is changing.
In the event that a company loses a key customer, what strategy should be utilized?
A company should be diversifying from concentrations prior to losing a key customer. However, if a key customer is lost, the obvious and most conservative answer is to cut expenses to remain profitable at the lower volume. Your company becomes self-sustaining quickly and can implement a long-term plan to replace the lost revenue. Business owners are entrepreneurs and may want to invest to replace lost revenue quickly. This can be done through acquisitions of a company, technology or people. All have an element of risk. Plan ahead and, if possible, implement your plan before losing that key customer.
How should companies plan their investment strategy during the midst of an economic downturn?
A cyclical business that is affected by economic downturns needs to develop a strong balance sheet during the good times. This will provide a competitive advantage during challenging times. You may be able to acquire a competitor at a great price or increase your market share one customer at a time. Regardless of your specific strategy, the flexibility provided by having liquidity during uncertain times will prove beneficial. <<
JAMES WADE is first vice president of Comerica Bank’s San Diego Middle Market Group. Reach him at (619) 652-5778 or email@example.com.
It’s hard to overstate the importance of establishing a personal relationship with your banker. To prosper in an increasingly competitive marketplace, it is crucial to have a dedicated banking partner who is intimately familiar with your needs and who can provide the proper financial resources to successfully expand and profitably grow your business.
The best way to establish a strong bond with your banker is by meeting with him or her, face to face, on a consistent basis. “Meeting with your banker every 90 days is very appropriate,” says Ray Boyadjian, senior vice president, group manager of Comerica’s San Fernando Valley Middle Market Group.
Smart Business spoke with Boyadjian about establishing a personal relationship with one’s banker, how to prepare in advance for meetings and what should be expected during performance discussions.
Why is it so important for business owners to establish a relationship with their banker?
One reason it’s important is because the business owner should want someone who really cares for his business and has a genuine interest in the progress of the business. Also, a personal relationship puts everyone at ease to share information without hesitation. An open relationship helps the banker to respond more proactively to what may happen downstream. Let’s say a company is in a positive cycle and has needs for increased credit facilities. By freely and openly sharing information, the entrepreneur will enable the banker to take a proactive approach in meeting the needs of the business. It is also important to share concerns with the banker if company management anticipates that the business will be going through some challenging times in order for the banker to participate in finding solutions and strategies.
How should business owners prepare in advance for a meeting with their banker?
The business owner should have in mind the entire key issues that concern the business. Key issues can be positive; for example, the company may be experiencing an unusual amount of growth and, as a result, management may need a larger credit facility. On the other hand, key issues can represent challenges; maybe a company may be expecting a cash flow crunch due to an economic downturn. Business owners should be aware of all key issues both positive and negative prior to meeting with their banker so they can have a brainstorming session and address such challenges. The essence of the meeting should be the ‘well-being’ of the business.
What type of information should be brought along?
Most companies are required to do reporting on either a monthly or quarterly basis and this information should be provided to the bank in a timely manner. It is important for business owners to be aware of their company’s performance. Financial statements will tell a story about the performance of the business. If the information provided to the bank suggests that profit margins are shrinking, the business owner should be well informed of this development and come equipped with answers and the underlying reasons. This puts the banker somewhat more at ease because he or she will perceive the business owner as being on top of things and addressing issues appropriately. The best thing business owners can do is analyze their company’s financial statements and understand exactly where their strengths and weaknesses are as well as the underlying reasons.
Who should be present at banker meetings?
If financial matters are comprehensively addressed in the meeting, it is helpful to have the business’s owner or CEO of the company as well as the CFO present. Some companies, such as those in the manufacturing sector, should also have the COO or general manager present on an annual basis. With manufacturers, a lot of things can be impacted if their processes are not synchronized properly, so the COO or general manager should attend banker meetings at least once a year, while the owner or CEO and CFO should attend quarterly, if possible.
What should be expected during performance discussions?
During performance discussions, it is very important to know where the company is versus its projections. If it is on target, that is great. If it is ahead of the target, then management should be able to explain what the contributing factors are. If it is behind, it is important to know what the causes are.
It is also important to anticipate what will happen next year and why. Bankers would rather not see much deviation from the original forecast. There are two things to which they always compare the numbers. The first is past performance: What is happening this year compared to last year? The second is projections: What is happening this year versus what the company said would happen? If a company gives a rosy forecast year after year but fails to meet its target, then the credibility of its forecast becomes questionable. You want to make sure there is integrity and reliability behind numbers. <<
RAY BOYADJIAN is senior vice president, group manager of Comerica Bank’s San Fernando Valley Middle Market Group. Reach him at (818) 379-2926 or firstname.lastname@example.org.
The recent amendments to the Federal Rules of Civil Procedure highlight the importance of having document-retention policies in place that take into consideration electronically stored records and data. In order to ensure that necessary information is preserved and can be produced in the event of litigation, it is critical to institute a corporate policy relating to e-discovery.
“Defining record-retention protocols in advance and not waiting until after a lawsuit has been filed is the classic avoidance of locking the barn door after the horse gets out,” says John Mitchell, an executive partner at Secrest Wardle. “It protects the credibility of the company, and it protects against the potential imposition of sanctions.”
Smart Business spoke with Mitchell about e-discovery and the importance of being proactive in respect to record-retention protocols.
What effect has e-discovery had on litigation?
We can look at this from two perspectives: the first is technical and the second is practical. Technically, new rules have been established that codify the fact that e-commerce is the order of the day and that electronic storage of documents now predominates. As a practical matter, these rules expand what can be done in discovery, and they create mechanisms for companies to be exposed to what heretofore had been undiscovered internal communication. Sometimes that is a great benefit to someone going through litigation, and sometimes it’s a potential detriment.
What are the recent amendments to the Federal Rules of Civil Procedures in regards to e-discovery?
It’s important to recognize that the rules have been around for decades, long before most people had ever heard the word computer. On the other hand, computers dominated companies’ operations for many years before the rules were changed on Dec. 1, 2006. The amendments define the capacity and the ability to request and obtain documents maintained electronically. The rules also provide very significant requisites for meeting and conferring among counsel prior to the initial mandatory conference with the court. Discussions need to include what is electronically stored, how data may be retained and specific protocols defining not only where these documents are but what can be produced and how.
How have these changes affected the manner in which parties handle written discovery?
At a baseline level, litigants start out with their preliminary requests for production, seeking specific information regarding what is maintained electronically and asking that documents be produced. Creative attorneys can expand their request from the traditional request for someone’s files to asking for what is stored on hard drives, what is available through servers on either the sender’s or recipient’s side and what might be available through the ISP server. The expanded availability of what can be asked for and the permanency of what is electronically stored has redefined the scope of what can be requested.
On the other hand, historic protections and rules for discovery have not changed: The fact that written requests are more expansive than in the past doesn’t change the ability to object on the basis of relevancy and privilege.
Why is it so important to institute a corporate policy that addresses the use and retention of electronic information?
What is in your documents so often defines your potential liability or your defenses. Unlike in days gone by, when everything you had was simply in the filing cabinet, the existence and capacity of anything stored electronically to remain permanently part of your file requires that you have a policy to protect how documents are created, who has the authority to memorialize information on behalf of your company and for how long that material is going to be retained.
How can CEOs and senior-level management be proactive in regards to record-retention protocols?
Management needs to work with counsel, whether it’s corporate counsel or retained counsel, to set up policies and define how document management is going to occur. The system needs to be reasonable, have a systematic approach and a clear definition of how the company is going to define their business needs and how it is going to meet legal requirements.
As to the latter, and even if it needs to be done by something as basic and fundamental as a literal checklist, there must be a definition put in place that defines when legal requirements create the need to retain documents that otherwise would be disposed of. This requires somebody with authority to define what immediate action needs to be taken, when requisite notice of impending or potential legal action comes in, and what steps will be taken to maintain the integrity of what is retained.
JOHN MITCHELL is an executive partner at Secrest Wardle. Reach him at (248) 851-9500 or email@example.com.
Emerging technologies in the banking sector, such as remote deposit capture services, enable companies to reduce costs while improving efficiencies.
The image capture solution allows businesses to scan checks at their office location and deposit them by transmitting an image file. By eliminating the need for delivery or mailing of paper items, transmitted deposits can enter the collection stream faster and with less effort, cost and risk than with traditional methods.
Customers taking advantage of this technology have longer processing hours as well as improved funds availability and deposit reporting all without leaving their office.
“Now is the ideal time to take advantage of the benefits that remote deposit capture has to offer,” says Joy Gilmer, senior vice president of treasury management for Comerica Bank’s Western Market. “As more and more banks are exchanging check images rather than paper checks, remote deposit capture puts a business in the right position to take advantage of the savings and convenience of image technology.”
Smart Business spoke with Gilmer about advances in banking technologies and the benefits that remote deposit capture provides to businesses.
How have advances in technology improved the ways that businesses can handle their banking needs?
Through technology, businesses are able to quickly communicate financial information to and from their financial institution. With the advent of remote deposit capture, companies are taking advantage of later deposit windows, better processing float, simplified deposit creation and better record-keeping.
How does the concept of remote deposit capture work?
The concept is simple. A scanner is installed at the company and customers access the Web-based application from their PC workstation or laptop. Checks are scanned and an electronic deposit ticket is created. Once the information is loaded into the deposit capture system, the information is transmitted to the bank and made available for deposit processing. Since it is data versus paper checks being delivered to the bank, processing/desk float and manual processing errors are reduced significantly. Remote deposit capture services have proven to be a significant value in disaster recovery plans. Recent fires in California, for example, caused road delays that impacted the ability to deliver paper checks to the bank. With remote deposit capture, there are no ties to commute-related issues.
In what ways can this function improve record-keeping?
Deposit information, including images of deposited checks and electronic deposit tickets, is stored and available for retrieval as needed. Having quick access to this information improves response time to customer inquiries and reduces research expense. The capture process gives a company the ability to update account receivables systems directly. Reports can be accessed from anywhere using the Internet.
How can utilizing remote deposit capture increase productivity while reducing costs?
Remote deposit capture enables a company to make deposits without the checks physically leaving the office, thus, reducing expense associated with time out of the office, courier services and/or third-party depository banks. Deposit preparation time is reduced as information is scanned versus keyed or written. With the recent enhancements in the marketplace to Web-based solutions, deposit capture functionality is improved even further. A company with multiple locations can review consolidated reports, perform research functions and approve transactions remotely from any location. A company can now utilize the convenience of browser-based remote deposit technology.
What role do you envision technology will play in the future for banking?
Technology will continue to play a significant role in the financial arena. The movement and management of financial transactions is a complex process. Timing of obtaining and reporting information is critical to the health of a business. Having the right systems in place to improve processes is necessary to the ever-changing needs of the financial community.
JOY GILMER is senior vice president of treasury management for Comerica Bank’s Western Market. For more information on deposit capture technology or Comerica Bank's Business Deposit Capture, you can reach her at (714) 435-3931 or firstname.lastname@example.org.
In today’s fast-paced business environment, the need to secure credit approval for merchandise purchases or services in a timely fashion has never been greater. Unfortunately, for many companies, the process of working with vendors, suppliers, financial institutions and other creditors can be a slow and arduous task.
In order to speed up the credit approval process, Comerica is offering services called credit mitigation tools.
The portfolio of services has a number of benefits, says Syd Saperstein, senior vice president, division manager of Comerica’s Special Corporate Financial Services Division. “Companies using this service can increase their profitability, increase their market penetration and increase customer satisfaction,” he says.
Smart Business spoke with Saperstein about the importance of obtaining credit approval in a timely manner and how the process can be facilitated.
Why is it so important for companies to be able to obtain credit approval in a timely manner?
Fulfilling customer orders in a timely manner is critical to any good customer service position that retailers or wholesalers need to maintain. If they can’t get credit approval in a timely manner for the goods they would like to order, then their customers will not get the product in the time frame that they expect it.
How does the composition of the supply chain affect credit decisions?
Products in a supply chain may go through as many as five or six wholesalers and distributors before they get to a retailer. Manufacturers usually don’t sell direct to retailers or consumers. Manufacturers sell to distributors who sell to wholesalers who sell to regional wholesalers who sell to retailers who sell to consumers. Every step where goods change hands is a credit risk decision that is going to be made by credit managers or the policy of a particular company about how and when they want to be paid and whether they are going to ship goods before they’re paid.
What are some methods that can be used to facilitate the credit approval process?
We substitute a trustworthy payer in the middle of the distribution chain I just mentioned. Instead of a wholesaler/manufacturer/distributor having to decide how much to trust a customer with a net worth of say $250,000, we substitute the customer with the bank that has $58 billion in assets. We replace the risk that would have been assumed by the wholesaler/manufacturer/distributor by putting the bank in the place of the customer.
Of what does the credit mitigation tools portfolio of services consist?
The portfolio of services is devised to put reliance on the creditworthiness of the bank in place of the higher risk ‘promise to pay’ of the distributor or retailer. To put it into a consumer context, let’s say you want to purchase a product from an online Web site and it costs $350. You would supply your credit card or checking account number to that seller. The seller would immediately collect the money from your account. When the seller gets the money, it tells the wholesaler/manufacturer/distributor to drop ship those goods that you just bought.
If the Internet seller has a credit line with a supplier and hasn’t exceeded its allotted credit for the month, then the wholesaler/manufacturer/distributor will ship the goods within four to five days. The customer is happy, and the retailer is happy.
The wholesaler/manufacturer/distributor incurs a risk because it has a sale but does-n't have any money yet. It has to wait until the end of the month and see if the retailer is going to actually pay the bill. So there is a limitation on how much credit the supply chain will permit to the retailer. The credit mitigation tools portfolio addresses these concerns.
How can companies benefit from this service?
In addition to increasing profitability and market penetration, companies using this service can increase the depth of product availability because they will never be out of stock. They can increase the breadth of products that they can offer for sale because they will no longer have barriers that will keep them from being able to fulfill their orders. If they were buying only from those suppliers where they have established credit, they would not be able to buy enough variety. For example, they may only have four or five manufacturers who grant them the credit they need. Credit mitigation tools can reduce this risk. Also, companies will be able to speed up the turn of inventory to whatever the consumer-driven demand is.
SYD SAPERSTEIN is senior vice president, division manager of Comerica’s Special Corporate Financial Services Division. Reach him at (415) 477-3246 or email@example.com.
As employers continue to struggle with escalating health care costs, the practice of offering mini medical health
plans is gaining momentum. Also known as limited benefit plans, mini medical plans charge individuals as little as $50 per month for routine medical care.
“Mini medical plans are generally significantly cheaper than individual plans because employers are in a better position to negotiate group rates with insurance companies, whereas individuals cannot,” says Stephen J. Peck, president of Kapnick Insurance Group’s Benefits Division.
Smart Business spoke with Peck about mini medical plans, how they can benefit employees and employers alike, and what considerations should be taken into account prior to launching a mini medical plan.
What are mini medical plans?
Mini medical coverage is essentially a limited health plan designed to replace major medical coverage for those individuals who would not normally be able to afford their employer’s insurance. Though mini medical plans provide coverage, it is very limited to routine medical visits and prescription drugs. In the event that the employee needs coverage for a major medical event, this would most likely not be covered. Also, mental health coverage is typically not covered.
However, the Business Journal reports that almost 95 percent of Americans do not accrue more than $1,000 in medical costs on an annual basis, so this plan may be ideal for a large majority of the population.
How can employers benefit from mini medical plans?
These plans were once only attractive to small businesses with only a few employees. However, large retailers, employers with lengthy waiting periods and employers with high fully insured deductibles are now opting for these benefits for several reasons. First, employers do not need to contribute to the plan in order to offer it. Secondly, participation level requirements are significantly lower than typical major medical plans, generally only 25 percent. Employers also have an edge on their competition with regards to recruiting qualified employees. Companies that offer these plans appear more attractive to hardworking, devoted employees versus another company without this coverage option or no coverage at all.
How do employees benefit from mini medical plans?
Employees benefit immensely from these plans, as most that enroll have never had the opportunity to purchase health insurance before. With these plans, employees have access to doctors and can pay for prescription drugs. For many, this is the only way that they would be able to afford these necessities to remain healthy. Since the plans are so economical, it only makes sense for employees to obtain this type of coverage. For instance, for $50 per month, an employee can purchase a $95 monthly prescription for a $10 co-pay, saving the individual $35 per month.
In addition, these plans are also extremely beneficial for employees subject to waiting periods before coverage will kick in with their employers. By allowing employees to have coverage right away, albeit a bit less than a normal plan, they at least have some coverage to tide them over until their major medical plan begins.
What factors should be taken into consideration before introducing a mini medical plan?
Although these plans appear to be a great option for those that could not otherwise afford health insurance, there are several downfalls that employers and employees must take into account. First, employers typically do not contribute to these plans, unlike the 50 to 100 percent contributions often made to traditional major medical plans.
Secondly, employees who do face major medical bills because of an injury or illness will accrue expensive hospital bills without coverage. Though the policy may cover $500 in prescription drugs and routine doctor bills, it may only cover $300 of the hospital costs. Even if the employee does not face major medical problems, these plans typically have a cap that is fairly low. If the individual has a series of routine doctor visits, the plan will not exceed coverage beyond the cap for any reason.
Employees also can run into problems when applying for traditional coverage later down the line. Since they were not covered under a traditional plan, many carriers will not recognize mini medical plans as credible coverage. Thus, the employee appears as though he or she has not been covered, which may lead to no coverage for a pre-existing condition. In addition to these concerns, mini medical coverage is also not recognized as HIPAA-credible coverage.
Finally, many of these plans have preexisting condition clauses in place. Although these plans are beneficial to employers because they are protected from rate increases, employees may cancel their plans after getting denied claims.
STEPHEN J. PECK is president of Kapnick Benefit Services. Reach him at Steve.Peck@kapnick.com or (888) 263-4656 ext. 1147.