Smart banking Featured

6:54am EDT June 30, 2006
Forget the competitor next door, in today’s global economy you have to think just as much about the competitor in the next continent. In the battle for market share, any point of difference can have a major impact.

“Companies have little or no control over factors such as competition, inflation, and rising interest rates,” says Bonnie Johnson, principal business relationship manager at Wells Fargo. “However, technology allows a company to gain greater control over its business operations by improving productivity, lowering overhead, and managing cash flow.”

Smart Business spoke with Johnson about the importance of leveraging banking technology for your company’s advantage.

How can banking technology increase productivity?
Electronic applications provide a business with real-time information that can be downloaded directly to the company’s payable and receivable systems. A company can interface with its financial services provider electronically seven days a week, 24 hours a day. This gives a business immediate access to accurate information, which in turn allows it to make quick, cost-effective decisions. With this technology, a company can also drastically reduce direct costs for mail, check stock and paper reports.

Why is sophisticated online banking essential to businesses?
Today’s businesses are competing in a global economy. They need real-time information that only online banking can provide. Regardless of location, a business owner can access financial information 24/7.

A single sign-on using state-of-the-art online security helps a company manage its finances with greater efficiency and ease. With online banking, a company can determine account balances, transfer funds from one account to another, place a stop payment on a check, verify that a receivable has been collected, pay down a line of credit, send a wire and perform other functions. Online access is more efficient than a phone call for the business, and because the service also provides efficiencies for the financial services provider, fees may be reduced.

How can technology increase the efficiency of the accounts payable process?
Managing the time value of extending payables and accelerating the collection of receivables is an important part of the monthly business cycle. According to a recent study by Deloitte & Touche, companies using a traditional accounts payable system spend an average of $50 to $150 per transaction. A free expense management system is an excellent tool to reduce these costs and increase productivity.

This system allows employees to use a business bank card to pay for expenses, which reduces the amount of time employees spend on processing invoices, making purchase orders and generating reports. Reports can be transmitted electronically to the company’s payable system, so it is not necessary to manually key in data.

Because payables are consolidated in one monthly billing, businesses can reduce costs of checks and mailing and reduce the expense of reconciling bank accounts and storing canceled checks. When the vendor accepts the card, the payment to the bank may actually extend from 1 to 28 days past the vendor’s payment due date.

How does technology facilitate the accounts receivable process?
Technology also can accelerate the collection of receivables through the acceptance of credit/purchase cards and the ability to electronically debit customers’ bank accounts. Most banks provide merchant card services that allow a business to accept credit/purchase cards. Card service technology ranges from low-tech desktop machines to high-tech Internet acceptance. Businesses benefit from receiving their cash within 24 hours from processing the card.

Automated Clearing House (ACH) services frequently are used for periodic debiting for services such as utilities, membership dues and shareholder dividends. They also can be used for business-to-business receivables. With an Internet-based system, business receivables can be debited directly from the customer’s bank account.

What types of banking technology streamline the check deposit process?
Technology has improved the retail lockbox system, in which banks collect checks directly from their post office and deposit them into accounts several times a day. Banks now offer check conversion into ACH debits, which accelerates availability of the funds. Banks can scan remittance checks, invoices and accompanying documents, and the images are available online the same day as receipt. This technology streamlines check deposit services.

A new service is available for companies that receive checks at their business. As a result of Check 21 legislation, companies now can electronically transmit check deposits to the bank. Companies benefit by reducing the time, costs and risks of physically transporting check deposits. Technology requirements for this process include a bank-authorized check scanner, a computer and an Internet connection.

Electronic deposit transmission also can improve the ROI of the company’s existing account receivable system. Discretionary data fields allow the company to enter customized information about the checks deposited. Reports can be downloaded in a variety of standardized formats (CSV, HYML or PDF) and/or uploaded to the company’s receivable system.

BONNIE JOHNSON is principal business relationship manager at Wells Fargo. Reach her at (713) 319-1551 or