Sunday, 30 June 2013 20:27

How to manage excess liquidity

A company’s liquidity and cash needs are like a river. The short-term immediate needs flow pretty fast as cash moves in and out of the business. But the further you go down in the water — down to cash that’s only needed for a rainy day — the slower it moves. In fact, it can be too idle.

“Often, there is this big pool of excess cash for the off chance they need liquidity,” says John Whiting, CFP, principal at Moss Adams Wealth Advisors. “But what they give up in that scenario, by keeping that money highly liquid, is less yield and return on those dollars. It can grow to be a fairly significant amount of money that potentially, year-after-year, is pooling up in unproductive ways.”

Smart Business spoke with Whiting about maximizing your business’s treasury management to make assets as productive as possible.

Why is treasury management critical?

Treasury management is the strategic management of a company’s working capital and excess liquidity. By maximizing this, given the specific business needs, the company is more competitive with better earning potential through properly deployed assets.

Today, businesses have accumulated a lot of cash and may not deploy those assets with the economic uncertainty. Even in this low-yield environment, companies that have built cash over the past three to five years could be getting an extra 20 to 30 basis points. And by deploying excess liquidity, you not only can get an extra return, but also, with low interest rates, can use working capital lines to address unexpected needs.

Why do treasury functions not get the same scrutiny as inventory control, capital budgeting and accounts receivable?

It can be an afterthought, as it may initially start so small it doesn’t feel like it warrants a lot of attention. Typically, a controller or CFO is charged with making sure the liquid assets are positioned, but there isn’t anything defining the objective.

What’s a better approach?

You need to be disciplined, looking out over the horizon and anticipating company cash needs to a better extent.

The business should have a written investment policy statement that defines expectations and is used to segment liquid assets into different buckets based on the time horizon for the business’s needs. The statement also would say exactly what investments are appropriate for each bucket, including the necessary credit quality.

Further, the investment policy statement should help set up controls to monitor risk.

How should the guidelines for how funds are invested be structured?

Start with assessing the risk and the needs of the company. Then, look at the next business cycle or more to see possible cash flow needs. You can time assets to ensure the liquidity is there when you need it.

Let’s say, a business is sitting on $10 million in liquid assets and is anticipating either an acquisition or significant capital improvements that might take $3 million or $4 million of that in 18 months or two years. Understanding that allows you to position the assets by buying municipal bonds or high-quality corporate fixed income that would mature three months before the assets might be needed. Now, you’re getting the best and highest yield possible, given that expected need.

What’s important to know about monitoring these treasury functions?

It’s important to understand the real return on investments by having a reporting mechanism, which then determines your success. For example, many CFOs or controllers use multiple financial institutions in order to mitigate risk. However, they need to aggregate all of the information to really assess and score the overall management process.

The cost of management is not terribly opaque, even with the effort to create more transparency. With fixed income, you need an understanding of who is negotiating on your behalf and how are they going about procuring that fixed income for you.

Half the battle is asking the questions and getting straight answers. An outside adviser is often the best management choice, but be sure to have an open discussion about the fee structure and associated costs. In fact, it can be a line item on your investment report because understanding the real cost of managing assets is key.

John Whiting, CFP® is a principal at Moss Adams Wealth Advisors. Reach him at (707) 535-4167 or

Insights Accounting & Consulting is brought to you by Moss Adams LLP.

Published in Northern California

Approximately 25 percent of mid-sized companies plan to expand how they use treasury management products this year, according to Greenwich Market Pulse. Treasury Management is more important than ever to make sure businesses not only manage risk but effectively oversee their payments and receivables with adequate liquidity.

But, how can you ensure your business is maximizing its liquidity and cash position potential?

“Businesses are increasingly challenged to provide a disciplined, efficient means to effectively manage their capital position and liquidity in response to the rapidly changing economic environment, increased regulation and globalization,” says Korlin Scott, Senior Vice President and Director of Commercial Product Management for FirstMerit Bank.

“As financial systems continue to evolve with more sophisticated functionality to support these market drivers, there are significant, cost-effective opportunities for businesses to leverage Treasury Management services for improved payment settlement, reconcilement and cash positioning.”

Smart Business spoke with Scott about how companies can use Treasury Management to save money and time.

Why is Treasury Management important for businesses?

Improving cash flow can help any business efficiently manage its working capital. When key aspects of the cash flow cycle can be utilized to their fullest extent, companies gain competitive advantages.

Treasury Management services can significantly drive efficiencies in the receivable collection processes and provide enhanced control over payments while delivering a real-time view into company finances. Driving improvements in the cash flow cycle can have a direct impact on a company’s working capital and ability to focus on revenue-generating activities.

What’s the first priority for employers with treasury management?

Taking advantage of a bank’s robust technology allows a business to significantly improve its cash flow cycle without costly investments or additions to staff.

The broad range of payment and collection services available includes automating the routine, daily process of making/receiving payments and centralizing the reconcilement of information for a consolidated view of the business.

Integrating these services — and, perhaps more important, the information — is key to achieving significant reductions in time spent on day-to-day administration and transaction processing.

How can employers more efficiently manage how they receive payments?

There is a tremendous opportunity for businesses to improve order entry through cash conversion, particularly with check payments, by speeding up the payment collection and posting process.

For example, lockbox services effectively automate the collection of larger volumes of payments. Payments are received at a central location and scanned for automated deposit, accelerating the cash application process. The ability to capture and image not only the payments but associated remittance information also improves the reconciliation process, leading to improved availability of funds.

Another service that is equally as effective is Remote Deposit Capture, which can be used instead of or in conjunction with lockbox services. Remote deposit allows your business to deposit checks immediately upon receipt without the need to visit the bank. You also have the flexibility of later deposit times providing faster access to funds without making physical deposits at the bank.

What’s the best way for a business to manage how it pays out cash?

Gaining control over the timing of outgoing payments allows businesses to more accurately forecast cash outflow, as well as maximize use of their available cash.

Automated Clearing House (ACH) services allow businesses to make and collect payments electronically with specific settlement instructions to more efficiently control the timing of the payments.  ACH typically costs much less than writing checks and with the ability to initiate payments online, you can significantly reduce payment risk while enhancing your ability to manage recurring payment information.

Wire Transfer is another alternative, providing an easy, secure means to transfer funds worldwide. For urgent payments, wire transfer has a distinct advantage over writing checks and ACH, as it provides immediate funds availability, which is an effective tool to improve the purchase to payment process.

These are just a few of the Treasury Management options that can more efficiently manage your cash flow, whether it’s expediting payment collection or gaining better control over outgoing payments.


Korlin Scott is Senior Vice President and Director of Commercial Product Management at FirstMerit Bank. Reach him at (330) 996-6496 or

Insights Banking & Finance is brought to you by FirstMerit Bank

Published in Akron/Canton

Treasury services provided by banks can allow businesses large and small to grow without the cost of adding labor. And those services can lead to higher profitability long term and introduce efficiencies of scale, allowing companies to redirect some of their personnel to higher value, more profitable activities, says Debbie Innes, executive vice president, retail banking and treasury management, at Cadence Bank.

“Everything done in treasury services is built around the cash flow cycle, so the products are targeted at bringing greater improvements to that process,” says Innes. “It not only makes it more convenient for employees in a purchase environment, but it’s more economical for the business on the outflow and the information reporting sides.”

Smart Business spoke with Innes about advancements in treasury management services, the associated technologies and how that translates to greater efficiencies and profitability for your business.

What are some of the latest advances in banking technologies?

One of the greatest technologies that treasury management services has been able to bring to businesses is remote depositing, which allows customers to deposit from their desktops, saving a trip to the bank. Desktop scanners, printers and other TWAIN-compatible devices allow businesses to make deposits without investing in special equipment. And now there’s the onset of mobile payments.

The use of text alerts is also increasing. Businesses can set preferences that, for example, alert them of a payment deposit received by their bank. Business owners can use text messaging to access almost limitless amounts of data regarding receipts, which is so critical for shipping orders or releasing products.

Because of technology improvements to lock boxes, banks can offer much faster throughput, shortening reporting times so clients know earlier when payments are received. Equipment is less expensive now, so the cost has come down. And the associated optical and image character recognition has been perfected, significantly improving the quality and clarity of the images.

Storage has also become less expensive, so banks are able to retain information longer. Three years ago, if a client wanted to store statements for seven years and provide access to those online, it would be very expensive to the bank and to the client. Today, bandwidth is much greater, which means prices for that service are value added and not a deterrent.

On the merchant services front, one of the most recent advances is multifaceted terminals. Businesses no longer need multiple pieces of equipment to accept credit cards, checks and cash, so they don’t need dedicated counter space or to make additional investments. Mobile also has entered merchant services. Instead of traveling with hardware to trade shows, for example, businesses can take payments with mobile devices.

What new services are available to businesses?

There is a new service called a payables lock box. A company’s bills are mailed to the bank, which scans and indexes the images. Through the Internet, the bank then provides the client the ability to see details of the bills and routes them to the appropriate business unit for payment approval, which the bank will do for you.

Also, companies often have multiple login IDs and passwords to get balances, conduct transactions, make payments, access merchant services and view credit card statements. Now there is a service, pioneered by Cadence Bank, that utilizes a single sign-on portal, allowing you to log into the bank and access every service you subscribe to using just one login ID, password and security authentication method.

How can treasury management help a business keep its cash secure?

Instead of having someone issue invoices and receive checks, a lock box outsources some functions to the bank so the issuer of the invoice is not the receiver of payment, minimizing the opportunity for theft. Banks offer malware software to buffer between the banking application and your hard drive, which can detect a Trojan virus and allow the bank to stop the online banking application. The bank then notifies the customer to take action. Because most cyber attacks are focused on payments, banks provide business customers with hard tokens for protection. Some customers don’t like carrying the hard token device with them when traveling, so now, by using a mobile device, the client can generate the number to key in through text messaging.

How can a business measure the return on investment associated with treasury services?

Typically, companies can realize savings though staff reductions and redeployment of personnel to higher-value work responsibilities, such as collecting overdue receivables. Going from paper payments to plastic also can offer savings on materials. And when a company switches to a card, routing becomes automated, reducing the time it takes for the transaction. Some companies will allow payments with later terms if a customer pays electronically because they have much less risk.

Treasury management products automate data integration, which makes collecting, reconciling and posting receivables faster. Also, the amount of data provided allows a company to examine its  inflow and outflow and more efficiently invest unencumbered funds.

How can businesses work with banks to drive better relationships?

Banks want customers driving their development efforts. They don’t want to invest in products clients don’t want, so it’s important for banks to understand clients’ business. Through that discovery, banks can better pair their technologies, process and services to their clients’ needs. Banks can build solutions because they have programming resources, information technology and strategists. If they understand a business’ situation, they can offer creative ideas to resolve their issues.

Debbie Innes is executive vice president, retail banking and treasury management, at Cadence Bank. Reach her at (713) 871-3915 or

Insights Banking & Finance is brought to you by Cadence Bank

Published in Houston

Managing working capital and cash flow can be a complex endeavor. However, utilizing your financial institution’s treasury 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,” says Kerri Werschky, treasury management specialist at First State Bank. “Exploring the technology that banks have invested in to bring information to their clients quickly and accurately will not require companies to hire additional staff or make investments in technology.”

Smart Business spoke with Werschky about how technology can help businesses better meet their banking needs.

How have advances in technology improved the ways that businesses can handle 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, many companies are taking advantages of later deposit windows, simplified deposit creation and better record keeping.

How can remote deposit capture accelerate collections?

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 allows extended deposit cutoff times for same-day ledger credit and the convenience of scanning and 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.

How do electronic payments reduce expenses and increase efficiency?

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. As long as the business understands that the input date and settlement date are different and allows for a three- to five-day payment, the cost savings are significant.

While the three- to five-day payment settlement is at first of concern, once the business understands that the same delay applies by sending out checks, this becomes an obvious solution.

How can the bank and business work together to mitigate fraud?

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.

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 check 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. 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 treasury management professionals and will most certainly help your organization operate efficiently and decrease costs.

Kerri Werschky is a treasury management specialist at First State Bank. Reach her at (586) 863-9485 or

Insights Banking & Finance is brought to you by First State Bank

Published in Detroit

Most business-to-business payments continue to be made by check, but electronic forms of payment such as ACH and cards are gaining ground. That trend will continue, as companies convert the majority of their business-to-business payments to major suppliers from checks to electronic payments over the next three years, says Jennifer Hall, treasury management services representative at Associated Bank.

“Although electronic payments may not fit every business need, they are becoming more attainable for companies of every size,” says Hall.

Smart Business spoke with Hall about how to move your business away from paper payments, thereby having more control over your cash flow.

What are the obstacles to moving to electronic payments?

A company’s ability to move to an electronic payment environment depends on many factors, including the potential financial impact, the type of industry, a willingness to change and an aptitude in working with automated systems. One challenge is simply that payments are made in multiple ways. Some businesses receive payments in four or five different formats — credit cards, electronic payments, checks sent to the office or checks to a lockbox, etc. When evaluating payment options, the challenge is to use the method that works best for you and your trading partner, keeping in mind the need to include required remittance information.

What are the benefits of electronic payments?

There is great value in moving away from paper-based payment processing, but the timing has to be right for your business. There are three main benefits to electronic payments over paper. Costs are reduced as the result of a reduction in the need for check stock, postage and manual labor; certainty of cash flow (due to the elimination of  guesswork); and the minimization of fraud risk. Every time a company mails a check, it risks its account information falling into the wrong hands.

According to The Accounts Payable Network, a group of more than 3,000 accounting, finance and AP professionals, in response to, ‘What is your cost to issue a check?’ answers ranged from six cents to more than $100. This fluctuation is why more companies continue to shift payments to ACH, purchasing cards and repetitive wires. Every step of a manual process contributes to higher costs, from the receipt of paper invoices to keying in invoice data, issuing paper checks, postage, taking phone calls from suppliers and missed opportunities for early pay discounts.

Are electronic payments catching on?

While electronic invoicing may be a far-off goal for some, electronic payments are here for good. Their popularity will continue to increase in business-to-business transactions as check volumes steadily decline, because electronic payments are efficient and the best way to more precisely target a business’s cash. The days of counting on float in check disbursements are winding down, with faster movement of electronic images in the banking system. Additionally, pinpointing the days you want to receive and disburse money can help you streamline cash forecasting.

How can automation with lockbox help streamline the payment process?

Lockbox is a timesaving solution, automating the processing of check payments. Checks  are sent with remittance information to a post office box owned by your bank. The bank opens the mail, sorts and images it, so that customers have access to images of both the check and the invoice. Deposits are made the same day, which improves cash flow and eliminates the time staff spends sorting through mail and making deposits manually.

This process can be further automated by having the lockbox area data enter pertinent remittance information. This is tied to the corresponding check, formatted into a data file and available for upload into your AR system, automating your cash application processes.

Generally, companies experience an 80 to 95 percent hit rate, allowing redeployment of AR staff to more value-added tasks. Banks can even merge various payment types into one data transmission, providing a single file however payment was made.

In addition, lockbox reduces paper filing and storage. Instead of receiving paper, a business receives an electronic file for uploading into its accounts receivables records. Access to electronic images of checks and invoices eliminates the need to take up space storing paper copies.

How do the majority of U.S. companies process payments?

According to the 2009 electronic payments survey from the Association for Financial Professionals, for payments to major suppliers, the typical company makes an estimated 48 percent of its payments by check, 22 percent by ACH credit, 5 percent by wire transfer and the remainder as ACH debit or credit card payment. Going forward, 48 percent of respondents expected that their organization is very likely to convert the majority of its business-to-business payments to major suppliers from checks to electronic payments in the next several years.

Will checks continue to be a part of business-to-business transactions?

Checks are still a very big part of business-to-business transactions. When making the transition to electronic payment processing, start slowly. Evaluate the best way to initiate the payment, then decide how to send remittance information. Before taking action, there are important conversations to have with your vendors, customers and your bank. Developing automated processes can strengthen relationships with key suppliers while improving the speed and accuracy with which invoices and payments are processed. <<

Deposit and loan products are offered by Associated Bank, N.A. (“AB”), Member FDIC and Associated Banc-Corp (“AB-C”). Loans subject to credit approval. Equal Opportunity Lender.

Jennifer Hall is a treasury management specialist at Associated Bank. Reach her at (312) 565-5275 or

Published in Chicago