When the owner of a prominent local moving and storage company approached Brentwood Bank’s Joe Verduci for a significant cash withdrawal so drivers could pay for gas, Verduci had another idea in mind. Why not distribute debit cards instead of cash?
“The owner can control what is being spent and track it easier on a day-to-day basis,” says Verduci, assistant vice president and retail banking manager. “Drivers can lose cash or spend it on other things.”
At first, the owner was wary of debit cards. A common misperception is that distributing company debit cards to employees is like giving them permission to spend indiscriminately. But, as long as controls are put in place, debit cards can save the company controller valuable time.
Verduci discussed with Smart Business other ways to optimize financial operations by providing dos and don’ts to help improve efficiency and overcome business growing pains.
What are the greatest concerns that business owners express when you call on them?
One of the biggest complaints has to do with the expense associated with accepting credit cards from customers. Merchant processing fees are a major expense for business owners, particularly those in the retail sector. Some merchant service companies operate like brokers they are middlemen that charge fees for ‘connecting’ the business with a merchant services program. Other programs allow business owners to work directly with the processor. There is no middleman and, therefore, no middleman fee. Do negotiate terms with merchant services representatives, and look at perhaps even cutting out the middleman if there’s no direct benefit to you.
Another issue related to merchant processing fees is that business owners tend to ask processors, ‘What’s the rate?’ But the rate doesn’t include extraneous fees, and these add up. Also, there are costs associated with processing cards that offer ‘points’ programs and other clauses that get hidden in a contract that you should discuss with a processor before you sign on. Do plan for merchant processing fees because they are a reality of doing business with today’s plastic-carrying customers, but don’t allow fees to slip through the cracks by neglecting to read the fine print carefully.
Remote capture is an en vogue service in the banking world. Is it everything it is made out to be?
Remote capture is a valuable service for certain business owners. Those who benefit most from the service do not have the time to make daily deposits during bankers’ hours, or they are not located within a convenient distance from a bank. For example, one owner who travels the region to call on customers stops at his office at the end of each business day. His assistant sets aside all checks received, and the owner takes them home where he has a remote capture tool that allows him to scan all checks. Deposits are made through the Internet at the owner’s convenience.
Others may benefit from either a lockbox account or even an Automated Clearing House (ACH) account, which allows electronic transfers to be made on an automatic basis. One of our clients owns 1,200 apartment units and collects monthly rent from each tenant this way. Tenants agree to pay electronically, which saves the property owner from having to wait for the checks to arrive to deposit them.
What is the best way to fund growth in the current economic environment?
The refinancing boom may be over, but keep in mind that rates are still low and show no sign of moving anytime soon. Now is still a great time to consider consolidating loans, refinancing commercial mortgages, or investigating other financing avenues.
The way not to fund growth is through cash. You must always keep rainy day money, otherwise, you’ll end up digging yourself in a hole if unplanned expenses arise and you have already spent your cash on capital improvements. Do consider refinancing debt if growth is causing growing pains, since rates are still low.
What other misconceptions do you find are common for the business confronting growth?
First, don’t assume you have to settle for off-the-shelf solutions from your bank. Second, do give your banker as much info as possible about your situation. Rather than pigeonholing your needs and prescribing the product-of-the-month as a solution, if your banker has hands-on, real-world experience and is worth his or her salt, he or she can often customize a solution to help you better manage your cash and other financial resources. On paper, products and services all look pretty much the same it’s how they can be applied to your unique situation that will ultimately set them apart.
Finally, don’t fall for the ‘bigger is better’ trap. The best solution isn’t the biggest solution, it’s usually the one that’s the most expertly tailored to suit your business and serviced according to your unique needs. In banking, size is never a substitute for service, and there is no substitute for experience.
JOE VERDUCI is assistant vice president and retail banking manager for Brentwood Bank, Bethel Park, Pa. Reach him at firstname.lastname@example.org or (412) 409-9000.