If you are a small business, you may not need all of the sophisticated banking services used by large companies to manage cash flow. However, as your business grows, you may find your cash flow will become unwieldy if you continue to employ the same methods used when your business was just starting out.
“Cash is king for all companies regardless of size … and even a small company can utilize sophisticated cash flow tools that can make a business run smoother,” says Judy Parsons, vice president and director of business banking for ViewPoint Bank. While small companies may not need to use all of the banking services used by larger corporations they may benefit from payroll services and wire transfer capabilities.
Smart Business spoke with Parsons and her associate, Tracy L. Marshall, vice president of cash management operations.
What is the typical cash-flow banking services scenario for a small business?
Parsons: Many small business owners — or sole proprietors — start out using a consumer online banking system to manage their business cash flow. While this may work for a while, it is not a long-term solution when the business begins to grow. Once a business owner starts to hire employees, or an accountant, the day-to-day operations become more complex and the banking needs change.
Marshall: The problem surfaces when the business owner needs employees or the accountant to access the online banking system to reconcile their books or move money. If the business owner doesn’t have a system that provides dual control — that is, separate log-in information for the owner and for the employees or accountant — there is a loss of control and an increased chance of risk to the business owner.
What kinds of services are available is a business does not want to invest in a corporate-sized cash flow management system?
Marshall: Growing businesses need to pay their employees and vendors as well as receive payment for products and services. If they are receiving or dispersing large transaction volumes each month, it can get unmanageable pretty quickly if they are using a consumer account and/or standing in line to deposit checks. Cash management products and services provide a method for moving money easier and less expensively.
Parsons: When many small business owners think of “cash management,” they often think of costly systems that are intended for large corporations. In the past, this has been the case. The banking community has started to realize that there is an untapped market of businesses that have outgrown the consumer online banking system; however, they are not yet ready for the complexity of a corporate-sized cash flow management system. Today, many community banks can offer services such as wire transfer, electronic payment processing, lock box, controlled disbursement and information reporting at a price that does not make it cost prohibitive to the small business owner.
What are the advantages — other than convenience — to having these cash-flow services?
Parsons: Multiple security entitlements — that is, allowing other employees to have limited access to accounts and payment processing options — is more than convenient if a business owner happens to be out of the office at a trade show or sales trip. Day-to-day business does not stop because the owner is not in the office, and it allows the owner to focus on activities that will make the company profitable.
Marshall: Business owners today need the ability to handle their day-to-day business while maintaining mobility to generate new business. The pace of doing business has changed so much in the past few years that there is little or no time to waste on manual or inefficient products and services.
What is the first cash-flow service that a growing small business should consider?
Marshall: The first thing would be to automate their payroll by setting up a direct-deposit process using a cash management system. The next would be adding wire transfer, stop payment and information reporting services. As a business grows, they can add features such as cash concentration and disbursement, data exchange and remote deposit capture.
Parsons: Some banks are discovering that this business market’s need for these services is growing substantially. Small businesses are growing in number… more people are joining the ranks of small business owner every day. It is a niche for banks that, in the past, has been under-serviced.
JUDY PARSONS is the vice president and director of business banking, and TRACY L. MARSHALL is the vice president of cash management operations for ViewPoint Bank of Plano, Texas. Reach them at (972) 578-5000 x7330 or [email protected].
