Any time there is a challenging economic environment, cash flow becomes
more critical than ever. A closer eye must be kept on all aspects of the flow of
funds in a business. It is obvious that a company must watch accounts receivable closely during a difficult economic cycle. It is also
important to monitor the financial health of
suppliers to ensure that they continue to be
capable of providing needed supplies.
This added work might be cumbersome,
especially since many offices today are run
with a lean staff. To accomplish everything
with minimal staff, you have to be efficient.
“Treasury management services enhance
efficiency, helping employees work quickly,
without sacrificing quality,” says Jackie
Hilder, vice president and treasury management team leader with FirstMerit Bank.
Smart Business spoke with Hilder about
treasury management services and how they
can be used to improve cash flow and
enhance overall business.
How are treasury management services used
to improve cash flow for businesses?
Treasury management services are used to
help companies collect and move funds
more efficiently, such as automatically transferring funds between checking accounts,
lines of credit and/or investments to minimize interest expense or to increase interest
income. There are also online services that
help companies manage cash flow and gather up-to-date information so they can make
educated business decisions.
A service most businesses benefit from is
lockbox. With a lockbox, the bank provides a
business with a P.O. Box address for customers to send payments to. The bank picks
up the mail and deposits the checks to the
business’s account, notifying the company
that payment was received. This notification
via the Internet is timely and includes images
of the checks deposited. Deposits are made
daily as checks are received.
A lockbox is a big time saver because
employees do not have to perform all the
tasks involved in mail opening and deposit
preparation or take time to go to the bank. By
relieving employees of clerical tasks, the
company allows them to focus their time on
specific tasks, such as collections or sales.
How have new technologies enhanced treasury management services?
Online banking allows a company to know
immediately of any transactions posting to
their account. Since many transactions are
electronic now, it is important for business
owners to have the most up-to-date information at their fingertips. Daily access to
account information also helps companies
resolve any issues quickly, again increasing
efficiency. Online banking can include many
different services. At a minimum, it provides
access to view accounts online. Other services may include wire transfers, direct deposit,
account transfer, positive pay, etc.
Current technology allows businesses to
send images of checks through the Internet
for deposit so employees don’t have to travel
to the bank. Remote deposit service usually
provides more time for deposits to be completed than typical branch banking hours.
Of course, technology has not completely
eliminated human interaction, service or
guidance. Bankers are still available to help
companies decide which services are best for
them and evaluate financing and investment
options. Treasury services simply enhance the banking relationship and make the cash
management process more efficient.
Why is it important to improve cash flow?
Given the economy, collections become
more important to businesses. It is important
for businesses to stay on top of customers
and partners to ensure they do not fall behind
in payments. In a tough economy if you don’t
have enough incoming funds, you will not
survive. Treasury services should be used to
enhance the overall collection, processing
and documentation processes.
The smooth movement of money is crucial
for a business to be profitable and sustainable. Timely processing of payments and collections facilitated by appropriate bank services keeps the cash flowing between business partners. Treasury management services make this flow more efficient.
Why are these services worth the financial
Most of these services will have some cost.
The key is to evaluate the cost of the service
versus the cost of handling the processes in-house. Is using employees to perform clerical
tasks the best use of limited human capital or
could employee time be used on tasks that
are more beneficial to the business?
A business owner who is hesitant of the
additional expense might compare this situation to the view held by many people regarding cell phones only a few years ago. Some
were reluctant to invest in cell phones initially. It wasn’t long before most people realized
the cost of a cell phone was minimal when
compared to the value of the work that could
be done with it. The same can be said for
treasury services. With these services, more
work can be done with less staff in less time.
Treasury management services have been
prevalent in large companies for many years.
Today, all businesses can benefit from and
afford some level of these services. Internet
access has decreased the need for sophisticated software to utilize the services, thus
decreasing the cost of implementing a corporate cash management program.
JACKIE HILDER is a vice president and the treasury management team leader with FirstMerit Bank. Reach her at (330) 384-7013 or