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

Insights Banking & Finance is brought to you by Cadence Bank

Published in Houston

All businesses manage their cash flow, but most don’t have a professional treasurer to help them with the task. And without that professional input, you may be paying for services that you are not  fully utilizing or overlooking services that could benefit your business, says Tom Hoffman, senior vice president of Treasury Management at Bridge Bank.

“By forming a strong relationship with your banker, you can reach out to your bank to fully understand things such as account analysis,” says Hoffman. “Most companies just  implement whatever they’re told and  do not realize there are services they are paying for that they  do not take full advantage of.”

Smart Business spoke with Hoffman about how to avoid missteps in setting up your cash management system and how technology has changed the way businesses handle their financial relationships.

What are some common missteps that businesses make when setting up their cash management systems?

Their biggest mistake is not reaching out to a banking professional to better understand their choices and make the best ones for the business.  It is similar to people who go to the same restaurant for years, buying the same thing over and over. What they  have not realized is that the menu changes and there are choices they would like better or are better for their health. That’s what happens in banking products; they change dramatically over time, and there may be better choices for your business.

How should business owners begin looking for a new banking relationship, and what should they be asking?

If you think it’s time to change your banking relationship, first go to your existing bank and take a close look at what services you have there, what you are paying for and what you are missing. Then, when seeking a new bank, before you ask anything, you should  explain to a potential banking partner  what your business does. Sit down with someone at that bank and have that person evaluate, in a consultative way, what your treasury platform is, and that includes not only how cash and information flow in and out of your business, but also the capabilities of your personnel.

Then once you choose a banking partner,  your new bank should review your account analysis statements with you on a periodic basis to understand what products you are using and if you are using them in the best possible way. Your accounts should also be reviewed if something changes at the company, for example, turnover in the accounting staff. A treasury management services review will lay out what your services are, who is entitled to what services in online banking, what payment limits you have in place and then determine if any changes need to be made.

Because most businesses do not have a professional treasury staff, companies should look to their bank for advice and take advantage of their expertise to use them as an outsourced treasurer.  That is what your expectation should be of your banking relationship.

How is technology changing the way businesses handle their financial relationships?

There has been an evolution in treasury management as systems have moved from paper-based processing such as writing checks. Over the past few years, online banking — e-banking platforms — have become the primary vehicle for obtaining information about accounts and tracking activity on a daily basis. Businesses can download transaction data, initiate payments, process wire payments and foreign exchange trades, do ACH transactions and do payroll all online. The online capabilities are cheaper and faster than the old paper-based way.

How will treasury management services be different in five to 10 years?

Over time, there will be fewer and fewer checks being written and more electronic payments being processed in an e-banking platform. The paper payment system in the U.S. is very inefficient. To bill a client, an accounting department creates a paper invoice, puts it in an envelope, puts a stamp on it and someone takes it to the post office, which puts it in a truck and delivers it to the client. The client then writes a check and it goes through the whole manual process again to get payment back to the provider.

In the next five to 10 years, instead of writing paper invoices, the entire process will be electronic. Companies will initiate an electronic invoice to the client, the client will get that in their inbox and reply, authorizing the vendor to process a payment against its account, and the payment will be made electronically. The efficiencies gained are tremendous; it speeds up cash flow, and it’s also good from an environmental standpoint.

But the challenge today is the information  that is related to that invoice. For me to process a payment against you, that means I’m pulling money out of your account, and you want to know what that payment is for. If you have 100 vendors with invoices coming in, you need a way to match those. So the trick will be tying  the invoicing process to the payment process.

The international area is also  inefficient and there are going to be a lot of changes there, not only in transferring information between countries but in payment information, as well. Right now, there are many different silos, and each payment type is in a separate silo, and may be in a different currency, so they don’t connect. Today, you see bridges between silos with companies such as PayPal making that connection between entities. But in the future, those  intermediaries will go away.

The first step for a handful of countries is an international ACH payment system, allowing companies to deliver and collect funds overseas much more efficiently, and that system will only continue to grow.

Tom Hoffman is senior vice president of Treasury Management at Bridge Bank. Reach him at or (408) 556-8353.

Published in Northern California

February 29 is a date that usually occurs every four years, and is called leap day. So you have one more day available in 2012. How many times have you said, “If I had just had one more day in a week, month, I would do (blank)”? The opportunity is available to you during this month of February. So what could you do?

Let’s look around to see if you’re ignoring any basic principles that can maximize your business value and your personal net worth. The objective in strategic wealth management is to integrate your business plan with your personal financial plan together to arrive at your life-plan goal. Too often, business executives and owners treat their personal goals separate from their business goals, operating each in a vacuum. Different sets of criteria are used to evaluate achievements in both business and personal arenas, and this further polarizes the strategies, causing a disconnect in achieving your ultimate financial and life-plan objectives. What risks are inherent in your personal and business portfolios? Do you take risk in business and therefore choose not to take personal risk in your portfolio?

Rather than obsess and concentrate on more ways to reduce taxes, are you “missing the mark” in utilizing key financial metrics to measure the financial success of your businesses?

Let me introduce the financial metric use of excess cash. When is too much cash a problem?

How a company's cash is managed is a critical job that most business owners do from an emotional perspective rather than a rational financial one. Poor cash management can harm the company's performance in subtle ways as well as more obvious serious ways. It is not having too little or no cash — it is also having too much cash as well. It lowers the return on assets and it increases the cost of capital (just like increasing the cost of goods without an offsetting increase in the customer pricing).

Holding excess cash lowers return on assets, increases the cost of capital, increases overall risk by destroying business value, and commonly produces overly confident management. When the cash balance exceeds the actual working capital cash balance need, you have excess cash. This cash is not necessary to the firm's financial operations. Increasing or decreasing excess cash balances is a leading indicator of future good or bad times for the company. When there is too much negative excess and decreasing cash generation, cash needs to be accumulated, but when there is excess cash balances and increasing cash generation, the excess cash needs to be invested or distributed. Let’s take the effects of excess cash one item at a time.

Let’s look first at the effect of excess cash on the return on assets (ROA). Assume a business has total assets of $1 million with cash making up 15 percent of the total assets or $150,000. Further, assume that the business has an annual after tax net income on an adjusted debt free basis of $100,000. That would result in the business having an overall ROA of 10 percent. If the business is only earning 2 percent annual interest on its portion of the total assets then the real effect of cash can be determined. In this example it is assumed that all of the cash is excess in order to illustrate without too much complication.

If the return on the cash is only 2 percent and the overall ROA is 10 percent then one would have to assume that the ROA would be higher if the cash could be eliminated from the total assets. When the cash is eliminated the total assets go from $1 million to $850,000. One more thing to look at: the interest income on the cash is now eliminated so the net after tax income needs to be removed. This would be around a net after tax interest income of $2,000. The total net income after tax now comes to $98,000 and that amount divided by $850,000 results in a new ROA of 11.53 percent, which is 15 percent higher than the original ROA.

Warren Buffet strives for a 15 percent return on his businesses — 15 percent on what? He is striving for a net 15 percent book value return on his equity. The remainder above the 15 percent, he distributes to shareholders. So if you had your financials analyzed, and you had excess cash flow, what would you do with the distribution? What about funding a pension/profit sharing plan, deferred comp for you, defined benefit plan, or other plans that now directly link to your retirement objective? Interestingly, the less excess cash retained in your business the greater the value you are building within your company. The greater the value you build, the closer your retirement goals come to being a reality.

Our Business Ferret report provides substantive numbers to lenders, shareholders, and the like to perpetuate the strategic growth. Bankers/lenders now will receive specific numbers assisting you in the process of properly using excess cash. Other stakeholders are now receiving distributions that incent them to drive value and company performance. For more information about the Business Ferret report please visit the business owners section on our website at

Happy Leap Year.

Robert A. Valente, CFP®, AEP®, is CEO and Managing Member of RAV Financial Services LLC. He can be reached at

Published in Cleveland

Typically when businesses think of their bank, they think only about loans and access to credit. But there is much more your bank can be doing for you, says Emily Ruvalcaba, executive vice president, division manager for corporate banking, at Bridge Bank.

“Of equal importance is working with your bank to focus on the cash management side of your business,” says Ruvalcaba. “Do you have the right deposit accounts, and are your cash balances working for you to the best extent that they can? Are payments being made and receivables being collected through electronic means? If your business transacts internationally, are you able to negotiate in multiple foreign currencies?  Businesses need a banking partner that will advise them on the right products that will help to improve cash-flow and their bottom line.”

Smart Business spoke with Ruvalcaba about how to find the right banking partner and how to make the most of that relationship.

If a business is looking for a new banking partner, where should it start?

Look to your trusted advisers, such as your attorney, insurance agent or CPA, to refer you to a bank with the expertise that your business requires. Professionals such as CPAs have relationships with many banks, and they’re likely to refer you to those that can provide your business with the best service possible. When you share common professional relationships with your bank, you become part of a business community that is focused on referring only the best service providers.

Plus, someone such as your CPA knows your business, and will be familiar with your company’s banking needs. That person knows the products and services you have with your existing bank and is in a position to refer you to the business bank — and the banker — that can better meet your needs.

Finally, don’t choose a bank just because it may be located near your office. In today’s virtual world, you can do your banking from anywhere: make deposits from your office using remote deposit capture, transfer funds, make payments, send wires, approve payroll — all can be done using online banking. Choosing the right bank and the right banker is too important a decision to be based solely on physical proximity.

Once a bank has been identified as a potential partner, what questions should a business owner ask to make sure it’s the right choice?

Ask how well that bank and its bankers get to know clients. Do they visit their clients to understand how their business operates? The business owner should also ask if the bank has experience working with similar types of companies. Ask who will be handling your account on a day-to-day basis. Will you have a banker or a team of bankers that is going to be consistent, or are you going to be calling an unfamiliar representative through an 800 number?

Ask how often they expect to meet with you, because a bank that gets to know its clients is going to be able to provide a higher level of service. More important, if challenges arise within the company, the bank is less likely to overreact and it will be more willing to work with you, but that can only happen if a solid relationship has been built. For example, if a company that has borrowed from the bank is growing rapidly and its leverage increases to a level higher than was set through the loan covenants, the bank will be in a better position to show flexibility and a willingness to work through such issues.

By building a strong relationship and understanding your company’s operations, your banker will be better equipped to find ways to accommodate unforeseen circumstances.

Should business owners share the potential for bad times with their banker?

Absolutely. For example, if you know that your business is going to have a challenging quarter and may have trouble meeting loan covenants, it’s a great idea to pick up the phone and talk to your banker.

Bankers don’t like to be surprised with negative news. You’re going to have to deal with the issue eventually, and the more proactive you can be, the better that relationship will be and the more that bank is going to work to be your advocate.

How can your banker help your business in other ways?

Sometimes business owners are so focused on growing their business that they don’t realize the full extent of banking products that their bank can offer. Sit down with your banker and say, ‘This is how I run my business; are there any other banking services that my company can benefit from?’

It’s also a good idea to bring in your banker when you’re doing tax planning with your CPA at year-end, especially if the company is projecting growth. As you’re planning for the next period, your CPA and banker can work together to ensure that adequate financing will be available to support your goals.

Emily Ruvalcaba is executive vice president, division manager for corporate banking, at Bridge Bank. Reach her at (408) 556-8327 or

Published in Northern California