Why outsourcing your company’s cash management function makes sense

Kacy Karl Owsley, senior vice president, treasury management sales manager, Cadence Bank

Business owners who are trying to grow their companies are focused on getting to the next level, and treasury management may not be a high priority.

By outsourcing this function to a third party, owners can maintain their focus on the business while relying on trusted advisers to take on the responsibility for understanding and managing the transactions associated with the business’s cash flow cycle. Outsourcing frees business owners from the time-consuming job of handling receivables and disbursements so they can pursue opportunities that will directly impact their business growth and bottom line.

“Outsourcing allows you to work with a business that has the tools to help manage processing receivables and disbursements faster and more efficiently, streamlining workflow to get transactions related to the ins and outs of the cash flow cycle done in a timely manner,” says Kacy Karl Owsley, senior vice president, treasury management sales manager for Cadence Bank.

Smart Business spoke with Owsley about how outsourcing treasury management functions can benefit business owners.

Why should companies outsource their treasury management functions?

An owner’s main focus is running the company and selling services or products. In smaller environments, there is not a lot of time for the manually intense process of handling receivables and disbursements. Outsourcing treasury management functions to an entity that has the most up-to-date tools and security features can save both time and money.

Outsourced capabilities can be complex, and it can be expensive for a small business to have that technology in-house. By outsourcing, you get the benefit of bulk processing, technology and use of an environment accustomed to handling many more transactions than you typically process. By outsourcing these functions, you can speed up the process and optimize your cash. This allows you to access your funds more quickly, invest more timely or pay down your line of credit faster, all of which impact your bottom line.

Another reason to outsource treasury management functions is growth. Smaller companies that are growing quickly don’t have the infrastructure, whether people or processes, to sustain that growth. If you build outsourcing into your growth model up front, you don’t have to build in people and processes related to treasury functions. This leads to a scalable environment because you can outsource that workload.

Which treasury processes are typically outsourced?

It depends on the ins and outs associated with a cash flow cycle for a small business owner. You can outsource simple tasks such as printing and mailing checks, or more complex tasks, such as invoice processing, approval and payment routing.

With your cash flow cycle, there are businesses that can take on that process for you. It could be on the receivables side. For example, you don’t have to be at the office or the mailbox to get your mail when you can have a provider receive your mail, make a timely deposit the same day, and provide you with images of what was processed and deposited into your account that day.

On the payables side, your outsourced vendor can receive invoices, scan them and receive a Web-enabled image of your
approval. After receiving your approval, a payment can be made on your behalf.

What should each business consider when outsourcing?

There are multiple options related to your internal business model when there is a lot of growth predicted over a short time. You have to be positioned for growth or have a provider ready and able to take on the transactional volumes of those accounts. There is also a cost difference between processing transactions in-house and having a secure infrastructure to do so, and using an outsourced vendor who has a more streamlined process. Because of the volume that vendors deal with, they can save you money in processing expenses with things such as bulk rates, postage, check stock and data keying.

Make sure your vendor has the capabilities to take on the unique needs and customization that you require in processing, as not all providers are flexible. You may have a unique process around a certain type of transaction, and you want to ensure that your outsourced vendor has the capability to perform that process. Also make sure the vendor has the flexibility to process transactions and provide real-time information and access to the data associated with the transaction. Having the capability to obtain information while you are mobile can make you a more powerful business owner.

Finally, you need to understand the contingency and disaster recovery plans for the outsourced vendor and how quickly its systems will fail over to its contingency model. Make sure that if you have pending transactions and there is a disaster that they are still being processed in a timely manner, even while in contingency mode.

How can a business establish a strong relationship with its outsourced vendor?

Your provider should buy in to the finite details related to what you are outsourcing. You want them to understand your business, the type of transactions you need processed, the processes you want to outsource and how far you will take the outsource relationship — whether fully integrated or with intermittent manual integration. Your provider should fully understand what your business model looks like to ensure that they are prepared for the possibility of changing scenarios and making transactional volume adjustments.

Kacy Karl Owsley is senior vice president, treasury management sales manager for Cadence Bank. Reach her at (713) 871-3917 or [email protected]

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