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 firstname.lastname@example.org.
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