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 korlin.scott@firstmerit.com.

Insights Banking & Finance is brought to you by FirstMerit Bank

Published in Akron/Canton

Managing working capital can be vastly complex, but your bank’s treasury management professionals understand those complexities and can work to help you and your business implement effective solutions.

Treasury management solutions may help manage corporate cash resources, reduce administrative burdens, speed collections, manage payments, facilitate cash flow, mitigate risks of fraud and make corporate capital work harder, says Jennifer Hall, treasury management specialist at Associated Bank.

“Treasury management solutions run the gamut from picking the right deposit products, moving to electronic payments to investing idle balances,” says Hall. “And some of the most crucial tools are those that help protect businesses from the negative impacts of fraud.”

Smart Business spoke with Hall about how treasury management solutions can help protect your business and how reducing the risk that your business faces can directly affect your net bottom line.

How can businesses reduce their risk of fraud?

Some of the most crucial tools are those that help protect businesses from the negative impacts of fraud. That is critical, as a 2011 Association of Financial Professionals Payments Fraud and Control survey indicated that 71 percent of organizations surveyed had experienced attempted or actual payments fraud in 2010, with an average loss of $18,400.

Paper-based check fraud is far more common than electronic payments fraud is, striking 93 percent of those businesses in the survey that experienced attempted or actual fraud. Check loss prevention tools can help mitigate the risk of check fraud loss by identifying potentially fraudulent checks before a loss is incurred. That entails a daily reconcilement of a company’s issued checks against checks presented for payment to the bank. When a check reaches the bank for payment, it is compared against the file of checks issued from the business, and any discrepancies trigger an alert. The business then verifies the details of the checks on the discrepancy report and decides to either pay the check or stop/return the checks.

How can a business optimize its cash?

Information services, or online banking, provides a detailed transaction history and balance summary information to assist in making decisions about optimizing cash on a daily basis. A quick glance at cash on hand can support decisions to advance or pay down a line of credit, or to move funds into an investment account. Online banking can save time by taking advantage of the ability to move money between accounts or by originating external payments electronically.

Online banking can also be the first line of defense for mitigating the risks of fraud. Encourage dual control for peace of mind; monitoring activities delegated and performed by other members of the staff and daily monitoring of transactions can lessen the risks of both internal and external fraud.

A type of daily reporting service called controlled disbursement may help maximize working capital. Typically, you’re notified by 11 a.m. each day of all checks that will clear against the account on that day. This allows you to precisely calculate how much money to transfer to pay down a line of credit or to invest, removing the check clearing uncertainty from your daily cash flow forecasting.

How can a business speed the collection of money it is owed?

Remote deposit capture service can improve a company’s workflow productivity by streamlining collections and cash flow.

Employees no longer have to drive to a branch to make a deposit into your business account. Instead, you can scan and deposit checks electronically from the convenience of your office. Virtual deposit tickets and endorsements allow remote deposits to be more efficient than manual deposits.

Making deposits this way can speed the availability of funds by extending your deposit cutoff times for same-day ledger credit. In addition, the image technology provides quality control by reducing the risk of errors, and the data may be exported directly to other accounting systems.

Outsourcing receivables collections to your bank can also reduce the costs associated with the processing of accounts receivable. Automated receivables posting can identify who made the payment, the invoice number and the dollar amount, and then integrate the information directly into the company’s account receivable system. In some cases, reducing the processing time of receivables results in information and/or funds being available days sooner.

How can electronic payments increase efficiency?

Electronic payments, or ACH, can save time and may reduce errors by avoiding manual processing of payments. There is an industry trend in which more and more business-to-business payments use ACH. It is primarily used for direct deposit of payroll, but increasingly, business that may be focused on going green, or that are possibly looking to trim administrative costs and reduce the cost of printing and mailing paper checks are using it for other payments, too. Doing so can improve efficiency in receivables and payables processing.

In addition, corporate credit card services, such as the ‘one card’ solution, can combine the benefits of a purchasing card and a travel/expense card into one flexible card. This solution may reduce time and cost in tracking, reconciling and managing travel/expense and purchasing costs. One cards have a built-in general ledger system that can simplify the accounts payable process. And some one card solutions also offer rewards.

A bank’s treasury management professional can help you implement the services that will be most helpful to your organization and its bottom line.

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 Jennifer.Hall@associatedbank.com.

Published in Chicago