Technology tool-related capital investments, such as new software, mobile apps and cloud computing services, are as important as a healthy workforce to many small business owners. But you must be strategic about the technological applications you choose, using your goals as a guide.
“It’s a really exciting time for small business. For the first time, you have access to tools and solutions that may have been cost prohibitive in the past, and you can buy them by the seat and without the need to build and support an enterprise infrastructure. This allows you to build a cost effective, end-to-end automation platform that really impacts your business,” says Frank D. “Buddy” Cox, Jr., executive vice president and chief information officer at Cadence Bank.
Smart Business spoke with Cox about how businesses are using technology to operate more efficiently and cost-effectively.
What emerging technology is impacting business productivity and profitability?
Cloud computing, a modern name for traditional outsourcing, has not only grown in adoption, but reach also has been extended from a focus on the enterprise to small business. This shift away from having to build a robust, secure and resilient in-house infrastructure to support software solutions, and instead migrating to a model where all critical infrastructure is built, maintained and shared by the provider, makes most all enterprise-level solutions available to small businesses in a very affordable way.
With Microsoft 365, for example, you can fully leverage Exchange, SharePoint and other enterprise-level solutions for less than $10 per employee per month. Platforms such as salesforce.com, when combined with modern real-time accounting platforms like financialforce.com, allow for a level of work flow and integration once reserved for large scale implementations.
Another technology that’s transforming business is the mobile platform. For most, it has become a primary computing device, allowing people to conduct business anywhere and at any time. When leveraged as a part of an overall business automation platform, the results can be very meaningful.
How are these new technologies transforming banking?
Banks continue to work with businesses that are building end-to-end automation solutions by plugging in at the right points in the process to provide real-time financial information and transaction capabilities. This includes, in many cases, unique one-off solutions to support a customer’s proprietary automated framework.
In the mobile space, we have seen an unprecedented adoption curve. A survey conducted by Constant Contact in March found that 66 percent of small business owners currently use a mobile device, such as a smartphone or tablet, for work. That same survey revealed that mobile apps increasingly are becoming part of how small business owners manage operations. Business owners clearly want to run their businesses and conduct their banking from the palms of their hands. Strategically, we are very focused on building feature-rich, secure and easy-to-use mobile applications that positively impact the day-to-day operation of businesses.
Mobile also is a much more capable and rich development platform than anything that we have built upon in the past. For example, not only can you turn your debit card on or off using a mobile app, but by leveraging location services on your device, we allow you to specify the use of your debit card only if it’s within a certain number of miles of you.
What are some challenges with the adoption of this technology?
Moving your data to the cloud or carrying sensitive data around on your smartphone present risk. Privacy, security, backups and business continuity are all topics to vet. Understanding from your provider how your data is stored, if it is encrypted at rest, how it is backed up, who has access to your data and how that is being properly controlled is extremely important. Third-party audits can be employed to validate that all of this is in place and functioning according to design. You must hold your vendors accountable to the same high standard with which you would grade your own internal control environment.
Frank D. “Buddy” Cox, Jr. is executive vice president and chief information officer at Cadence Bank. Reach him at (713) 871-4000.
Website: Cloud computing services and mobile technology are changing the way businesses operate and serve clients. Learn more at www.cadencebank.com.
Insights Banking & Finance is brought to you by Cadence Bank
Interaction with an employee forms the basis for a customer’s perception about a company, which makes customer service a great opportunity to showcase the company’s brand, says Jo Ann Lofton, senior vice president, retail executive, Cadence Bank.
“It’s all about knowing your customer — they trust you and you trust them. That’s the basis of a good relationship,” she says.
Smart Business spoke with Lofton about best practices for good customer service.
What is the value of good customer service?
Good customer service creates loyalty, generates customer retention and ultimately brings in revenue. It also creates an avenue for referrals. Word-of-mouth endorsements are extremely important, especially when based on a strong and proven relationship. Creating that is an exception and people talk about exceptions.
What are the top elements of high-quality customer service?
Listen and get to know your customers and what’s important to them. It’s critical that you understand the customer’s concerns in order to offer help and solutions.
Employ people who like people, have good judgment skills and an innate desire to help others. Make sure employees have the attitude that you want projected. If there’s friction in the office, call the staff together, acknowledge it and find solutions to create a positive atmosphere. It’s amazing how a friendly and peaceful office will give energy to customers who call or walk in.
Train your people diligently. They need to know exactly what’s expected of them, both with external customers and co-workers. They must have the tools and the authority to bring about swift solutions to problems, and they should be acknowledged for good performance.
Be responsive, whether by email, phone or to a customer in front of you. It’s unacceptable not to respond. Even if you don’t have an answer or solution, you can thank them, tell them you’re looking into it and promise to get back in a timely manner.
Finally, honor what you promise the customer. Customer relationships are built on trust, respect and integrity. These qualities determine the strength of your relationship and give the customer confidence in the decisions that are being offered. You have to know when to be flexible to meet a need. Customers relate your resolve and decision-making ability to their overall impression of the company, and that can have a lasting impact.
How do you instill a culture of service excellence?
A service-centered culture begins with a leadership team committed to a philosophy that advocates exceptional service and employees who are deeply dedicated to fulfilling that promise.
It’s also essential to know your target market and how to respond to them. Different cultures, for example, have specific expectations that may call for distinctive interaction in certain situations. Understand the differences and what’s important to each culture, and see how you can meet the needs of those customers with the resources you have available.
What are some lessons you’ve learned from disgruntled clients?
The greatest lesson is to know that you can help resolve any issue by listening, staying calm, and using common sense and good judgment when offering solutions. And remember it’s not just what you say, but how you say it — your body language speaks volumes.
If what you’ve proposed does not work for the client, work with him or her to devise an agreeable and suitable solution that meets his or her needs, and then take action immediately. Most importantly, take the opportunity to learn from the experience and make improvements.
What would you consider an out-of-the-box convenience to offer customers?
It doesn’t have to be dramatic. If you have conference rooms, you can offer them to good customers. You can invite customers to have lunch with the chairman, and have an open discussion on the economy and what’s happening. It’s more than just taking on a little inconvenience in the hopes that maybe you’ll get something out of it. If you really want to help them they will sense that.
Jo Ann Lofton, is senior vice president, retail executive, at Cadence Bank. Reach her at (713) 807-1336 or firstname.lastname@example.org.
Cadence Bank offers a host of resources for small businesses through all of its branches. Find the nearest location.
Insights Banking & Finance is brought to you by Cadence Bank
Business owners have exposure to financial fraud for all payment methods.
In 2011, 66 percent of businesses faced attempted fraud, according to a survey by the Association for Financial Professionals. Although three-quarters didn’t have losses, the remainder had an average loss of $19,200, which can be devastating to small or middle market companies.
“This tells us that business clients in particular need to take measures to prevent fraud — whether it’s internal or external,” says Kacy Karl Owsley, senior vice president and treasury management sales manager at Cadence Bank. “Businesses should work with a financial institution that can offer solutions and best practice recommendations to help them mitigate theft.”
Smart Business spoke with Owsley about fraud risks and preventative measures businesses can take to avoid being a victim.
Describe today’s fraud landscape?
Sophisticated database technology, online information exchange and mobile access devices make payment fraud a global issue that can be completed anywhere. Checks, despite their declining use, continue to be the leading target for paper and electronic fraud, primarily because each contains relevant financial information — account and routing numbers.
A business only has 24 hours to dispute an electronic transaction after the debit hits its account or funds might not be recovered. Fraud often is directed at business accounts for the larger available balances and transaction volume.
What solutions can banks provide?
Among the products banks offer to protect accounts from electronic or paper fraud is business online banking, which allows accounts to be viewed daily to ensure only intended debit and credit transactions are made.
Positive pay operates as a fraud prevention system, allowing businesses to export check registers so the bank can match checks through an item-processing network or at the teller line. If there’s a problem, the bank alerts the business, usually via mobile device, and the employer decides to pay or return the item.
Automated Clearing House (ACH) positive pay or block works much the same way to prevent electronic fraud. Business owners can set up approved vendors that are automatically paid, as well as maximum dollar filters. Other transactions generate an alert, so employers can make a quick decision within the 24-hour window.
Businesses can utilize credit cards to eliminate sharing bank account information. Cards have cash rebates and point systems, and allow for integration to post to an accounting system.
Through lockbox services, businesses can accept payments directly at their bank rather than at their business location. Banks can manage payment processing, data entry and deposit preparation, and help prevent internal fraud by segregating these duties.
Finally, with account reconciliation services, banks assist in payment reconciliation to ensure timeliness and swift detection of suspicious activity.
What internal controls or preventative measures should a business implement?
A bank’s treasury management team can consult with clients on financial transaction best practices. Some suggestions are:
• Separation of duties for those creating versus signing checks.
• Having a dual control process for vendor acceptance or setup, as well as any financial transactions.
• Ensuring financial transactions are done on a dedicated computer.
• Downloading a software application like Trusteer Rapport™, which many financial institutions offer free of charge. It’s an additional layer of malware or anti-virus monitoring that notifies the bank and business when a PC downloads a virus. And the bank can instantly disable the user login.
• Knowing your employees by doing background checks, and pursuing any unusual behaviors or transactions.
• Setting up tight policies around email and Internet usage. Also, keeping anti-virus software up to date.
• Hiring an external firm to run a mock attack to test anti-fraud measures to ensure they cannot easily be broken.
• Conducting an annual audit, review or compilation.
Kacy Karl Owsley is a senior vice president and treasury management sales manager at Cadence Bank. Reach her at (713) 871-3917 or email@example.com
Insights Banking & Finance is brought to you by Cadence Bank
Too many business owners know they should save for retirement but put planning for it on the back burner. Forty percent of small business owners have no retirement savings or pension plan, according to a recent American College study, and some 75 percent have no written plan as to how to fund their retirement.
“Business owners shoulder the most responsibility for their businesses, yet often forget to pay themselves first,” says Jeff Manley, executive vice president, wealth services regional executive – Texas, at Cadence Bank. “But if they’re not taking care of themselves along the way, this can position them poorly for the future.”
Smart Business spoke with Manley about how business owners can plan for retirement.
What 401(k) plans suit business owners?
Small, medium and large businesses can use 401(k)s. These basic retirement plans work well for companies looking for a retirement plan that includes both the owner and employees. Making this more compelling is that the IRS raised contribution limits by $500 for 2013, making them $17,500 and $23,000 if age 50 or older, for the first time since 2008, boosting potential savings.
Individual 401(k)s and Uni-k plans are for sole proprietors, or one employee plus a spouse working for the business. These plans, which are similar yet with important differences, are the highest saving vehicles for individual business owners as they allow them to put money away on a pre-tax or after-tax basis, or a combination thereof. Business owners wear two hats — contributing $17,500 or $23,000 as an employee, and an additional 25 percent of income, up to a $51,000 maximum, as the employer. A trusted financial adviser can help determine which plan is best for you.
What IRA plans are available?
A traditional IRA is a tax-deferred retirement account, while a Roth IRA takes contributions after taxes. There are different theories on which is better for whom, with many business owners doing both. For 2013, both IRA types have maximum contributions of $5,500, $6,500 for those over age 50, so they can’t support a retiree.
A self-directed IRA is a tax-deferred account that allows creative, nontraditional investing such as private equity and real estate. Normally, IRAs only invest in securities registered with state or federal authorities. However, self-directed IRAs have a lot of regulations and not all investment advisers provide them.
A Savings Incentive Match Plan for Employees (SIMPLE) IRA, working like a traditional IRA, has relatively small contribution limits — $12,000 for 2013, with catch-up contributions of $2,500 for those over 50. Employees can get up to 3 percent company match. Although this doesn’t allow for much annual savings, it’s less expensive to administer than others.
A Simplified Employee Pension (SEP) IRA is a type of traditional IRA. The employer is the sole contributor, and the contribution must be an equivalent percentage for every employee. The 2013 contribution limit is 25 percent of a person’s salary, up to a maximum of $51,000 per employee. This plan works well with family-run businesses.
How much should be saved for retirement?
With the different contribution limits, the amount that can be saved annually varies dramatically — from $5,500 to $51,000 in 2013. Those early in their career should start saving now and try to max out the percentage they put away each year. Getting compounding earnings working early means more money in the future.
The general rule is to save 10 to 15 percent of annual income in retirement-type savings vehicles. But those earning a good living now who want to continue their lifestyle through retirement may have to save millions. Ask a financial adviser about available options to understand what will work best for you. Retirement planning isn’t something that can be put off. Business owners need to weigh their options. ?
Guidance provided in this article is educational in nature, is not individualized, is not intended to provide legal or tax advice, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions. You should consult with an attorney, tax or other qualified professional for specific advice regarding your unique circumstances.
Jeff Manley is executive vice president and wealth services regional executive – Texas at Cadence Bank. Reach him at (713) 871-3931 or firstname.lastname@example.org.
Insights Banking & Finance is brought to you by Cadence Bank
As regulations are established and laws get more complicated, you and your company face more exposure to lawsuits. And with any lawsuit exposure, the judgment is often not as significant as the defense — a victory could come at a high financial cost, which comes out of your pocket if you’re without insurance.
“Insurance is a mechanism that is designed to help you avoid huge legal defense costs and the financial burden that accompanies them,” says W. Reed Moraw, president of Cadence Insurance, formerly Town & Country Insurance Agency, an affiliate of Cadence Bank.
Smart Business spoke with Moraw about how the right management liability policy limits your exposure to certain claims.
Why should a company consider this type of insurance in addition to standard property and casualty insurance?
Private companies have considerable exposure to one or all of the following — management liability, employment practices, crime and cyber claims. Therefore, you can purchase a management liability policy that bundles a broad mix of insurance coverage, such as directors and officers liability, employment practices liability insurance, fiduciary, crime, cyber liability, employed lawyers, and kidnap and ransom coverage.
What’s the benefit?
Premiums have historically been low in relation to the way exposure and claims are trending. It’s recommended that all private companies have a detailed review of their exposure as well as the costs of the coverage.
You want a comprehensive insurance policy that will pay for the cost of defense as well as a settlement or judgment, if there is one. The cost of defending yourself, whether you win, lose or settle a case, can be very high. There are always exclusions and limitations to policies, but your agent can work with you to identify your risks and find a policy designed to mitigate your exposure.
How does this type of coverage work?
The insurance underwriting starts with an application and supporting documentation such as financials, loss history, company employee handbook, etc. There are numerous insurers that underwrite management liability policies, but the quality of coverage is not uniform. Every company has a unique exposure, and therefore the agent or broker should create a risk profile and seek the best policy to fit the client’s need.
How’s the market for this type of coverage?
In terms of premium, retention and breadth of coverage, the market is shifting. From 2004 to mid-2012, insurance rates have gone down significantly on a year-on-year basis. Currently there’s pricing pressure in the marketplace. Most carriers have stated they will be looking to increase premiums, moderately restrict underwriting and potentially reduce coverage.
Driving these changes is insurance carrier loss experience arising from employment practice liability claims. In addition, directors and officers’ claims are becoming more significant, some of which can be attributed to increased merger and acquisition activity. The costs to settle and/or litigate those cases are averaging around $225,000 — with some approaching $5 million.
As a result, many within the life sciences, real estate, banking, financial services, oil and gas industries, etc., are finding it difficult to secure coverage or are seeing their existing program renew with coverage carve backs, restrictions and price increases.
So, what should a company do?
A company needs an insurance agent well versed in these areas to evaluate exposures, secure coverage and service a private company’s needs. Companies should seek an agency with knowledge of coverage forms and enhancements, changes in insurance company appetites and broad access to the insurance marketplace.
It’s also helpful if your employee handbook is comprehensive and up to date, and you’ve kept up with changes in the laws as they relate to your employees. The time to talk with your insurance agent is when you are thinking about making a change within your company, not after the change has been made, just as you would consult your banker or attorney. It’s important to have a good agent who keeps up with trends impacting the industry in an effort to ensure exposures are mitigated and gaps are covered.
W. Reed Moraw is president at Cadence Insurance, formerly Town & Country Insurance Agency. Reach him at (713) 461-8979 or email@example.com.
Website: To learn more about the types of insurance that could help protect your business, visit www.cadenceinsurance.com.
Small business owners are increasingly concerned about obtaining long-term or short-term business loans, according to a survey by the National Federation of Independent Business. However, by showing enthusiasm and understanding for your business, you can get started in a good way with your banking relationship, thereby increasing your changes of securing a loan.
“Build a support group, have good financial understanding and really keep your books in the best possible order that you can,” says Hank Holmes, president, Texas Region, of Cadence Bank.
Smart Business spoke with Holmes about how business owners can use good financial practices and a trusted relationship with their bank as a foundation for future lending needs.
What does a bank look for in a good borrower?
It’s important for borrowers to be prepared and understand their business as much as possible, including the risks. Often you can talk about the upside — what you can do to generate new revenue — but you also need to understand what could cause you to miss your revenue goals, such as increased expenses from health care or a change in the industry’s environment.
Additionally, many times credit decisions are a function of a small or mid-sized business owner’s personal financial performance and credit history. So, as you’re developing your business, it’s important to maintain your personal financial affairs.
How do you find the right bank?
Start developing a relationship with your current bank. The earlier you can develop that trust and understanding with your banker, the better.
You want a bank that meets your needs and understands it’s a relationship-driven business. That way the banker can alert you when your business could be impacted by trends in other industries. If you have a banker that you’ve dealt with — that you’ve developed a relationship with — typically he or she will know that kind of thing is happening at the same time as you do. They can see when there’s an improvement versus a potential bump in the road.
As a business owner, you also can use your contacts in trade organizations or the industry to reach out and find a bank that understands your industry.
What steps can you take to best prepare for meeting with your prospective banker?
• Have your financial statements in order. Understand the revenue/expense side of your business — have a good grasp of the things that are going to positively and negatively impact your company. There are a number of good options, such as QuickBooks, that can be used to maintain your finances at the highest level you possibly can.
• Be able to explain what your business is and what would influence your financial statements. Is it the price of oil and gas? Is it the cost of electricity? Are you going to be able to get the inventory you need in order to meet the revenue needs of your clients?
• Be aware of your personal capacity and credit worthiness. It’s important to not only be able to run and understand your business, but also maintain your personal credit worthiness as positively as you can. In general, if you’re a company that has revenue of a million dollars or less, banks look at the individual who is driving that business, who is there on a day-to-day basis. And, it’s important for that person to show his or her capacity and support for that credit.
When you build and maintain a relationship with your banker, especially one who understands your business, you can take it one step further. If for some reason you get turned down for a loan, then find out why in order to determine what you can do on the next effort.
Hank Holmes is president, Texas Region, at Cadence Bank. Reach him at (713) 871-3913 or firstname.lastname@example.org.
Insights Banking & Finance is brought to you by Cadence Bank
Seventy-five percent of small businesses have expressed that their financial institution doesn’t effectively understand their needs. As a result of this dissatisfaction, the banking industry is moving to more of a relationship manager model to service the small business segment.
“Banks are hiring full-time relationship managers who have a number of small businesses that they call on,” says Gary Wright, senior vice president, small business banking executive, at Cadence Bank. “These relationship managers offer expertise in the ‘business’ of small business, and also bring an understanding of particular segments and industries that can be extremely effective in identifying the right solutions to meet a small business’s financial goals.”
You, as a small business owner, have a person to call on if you have an issue — rather than an 800 number — and that banker knows who you are and is informed about the issues impacting your business, he says.
Smart Business spoke with Wright about choosing a bank and how relationship banking can give business owners the best service for their financial needs now and in the future.
As you begin to shop for a financial institution, what should you consider first?
First, you need to give thought to why you need a bank in the first place. Are you looking for deposit services? Do you need cash management solutions? Are you looking for loans or sound advice regarding what it takes to qualify for a loan or a loan that best fits your needs? While it’s important to evaluate a bank’s pricing or incentives, also think about the overall banking relationship that the bank is offering.
Look for a bank that can grow with you as your business progresses. You may only need a business checking account today, but what might your business need in the next five to 10 years? Think long term — approach the decision as you would consider any long-term investment. Do research to find a bank that is fiscally sound and will be around long term, as the industry deals with increased costly regulations.
Size is important, too, especially when it comes to lending. Regional banks generally can offer you more competitive rates compared with local community banks, as well as less bureaucracy and more personalized service than larger institutions. Regional banks often offer the advantage of online banking and treasury management services that can help increase your company’s efficiency.
How can businesses benefit from banks that are relationship focused?
Relationship-focused banks are concerned with building relationships with small business customers by focusing on the long term and incorporating forward-thinking strategy. Their bankers take an interest in you and your business. They want to know how you got started and about the successes and challenges that led you to where you are. They really dig deep into the nuts and bolts of your company to learn your business and financial operations so they can offer solutions that are specific to your needs.
With a relationship focus, there’s greater accessibility. Working with a bank that knows you and your business can speed up problem solving, for example, as the bank already knows your company and can easily inform you about the different options that are available. The bank can match the solution to the need, rather than just pushing a product. That’s the whole point of building a relationship with the small business.
As a business owner, you may often be on the go and require banking services that allow you to bank 24/7, wherever you are. What sort of solutions should you look for?
Technology is one of the fastest-growing areas in banking. You should consider a bank that is committed to technology, such as:
• Online banking that provides businesses with access to business online banking and treasury solutions.
• Mobile banking. As the number of smartphone users grows, coupled with the countless demands small business owners face daily, mobile banking is increasingly becoming a necessity. Many banks offer mobile banking apps and specially designed mobile sites that allow small business customers to access online banking services using smartphones or tablets.
• Text banking, where you can text your request and receive details on your account almost instantly. You also can transfer funds from one account to another via text.
How does the bank provide cash management solutions that take into account a small business consumer’s needs?
Generally, treasury management solutions cater to larger commercial businesses, but many of these services are increasingly in demand by smaller businesses. Treasury management solutions now are being structured to affordably help small businesses with their cash flow processes and protect them from fraud. For example, remote deposit capture services can allow you to deposit checks to your business checking account from your desk and are designed and priced for businesses with a lower volume of checks.
Whatever services you need, the goal of the relationship manager is to help you identify and enact financial solutions that will help your business prosper today and tomorrow. Small business owners are busy juggling numerous responsibilities, and it’s valuable to have a steward that understands your business and can provide the tools necessary to make the right
Gary Wright is a senior vice president, small business banking executive, at Cadence Bank. Reach him at (713) 871-3970 or email@example.com.
Insights Banking & Finance is brought to you by Cadence Bank
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 firstname.lastname@example.org.
For business owners and entrepreneurs, wealth management and planning is not a project, it is a process.
“It’s something you never complete; it’s ongoing in nature,” says J. Harold Williams, CPA/PFS, CFP, president and CEO, Linscomb & Williams, an affiliate of Cadence Bank.
He says that too many people approach wealth management erroneously, thinking, “I’ll get a financial plan done and check that off my list.” However, financial planning is much like designing a blueprint for a house, building it and maintaining it — a process that never ends.
Smart Business spoke with Williams about how to lay the foundation of your financial future while transitioning out of business ownership.
What actions are important for entrepreneurs before year-end in light of the expiring tax provisions such as the $5 million gift and estate tax exemption?
There is a unique condition in 2012 where you can gift, during your lifetime, tax free, just over $5 million. Business owners generally have some complexity to their estate planning, in that ownership of their business is their predominate asset and it is illiquid, which makes it difficult for estate planning purposes.
This special provision in 2012 allows you to transfer a significant portion of your wealth during your lifetime in a way that the future growth on the amount that you gift is not going to be counted in your estate.
For example, if you have a successful family business worth $20 million and you expect that its value will grow, it is possible to take a partial interest in that business this year, as much as $10 million of the value, and gift it into a trust for your heirs. If you gift half of it in 2012 and the business value doubles, the doubling of value in the half that you gave away would not be counted as part of your estate when you die.
There have been a lot of discussions about what the estate tax rate will be in the future. Right now, the estate tax rate is 35 percent, so if you can move appreciation to the next generation and not have it taxed, the result could be a savings of 50 percent of the amount that is transferred. That is a powerful planning concept.
If business owners are considering selling their business, how do they gauge financial security to be sure the income they had previously been earning is adequately replaced?
It is common for business owners who are about to sell, or have just sold their business and are walking away from an attractive paycheck, to begin wondering how they will replace that paycheck.
Before you sell the business, do some planning to confirm that you can sustain the lifestyle you have enjoyed while relying upon a more traditional portfolio of investments. When the business is liquefied, you pay some tax and need to invest the money.
It is likely not possible to get the same returns on an investment portfolio that you got from the business, so it is important to run the numbers and recruit someone who can help you determine the various contingencies. Doing this before you sell the business will allow you to engineer some things into the structure of the selling contract to enhance your ability to sustain your lifestyle.
Are Family Limited Partnerships (FLP) still being used as an estate planning tool, and what is the IRS’s attitude about this?
They are being used, and most cutting-edge estate planning attorneys recommend them as a viable vehicle. FLPs are not particularly loved by the IRS, but they are effective if done right. The main thing is to stay involved with your FLP; don’t just begin one, make a file and put the file away. The IRS could potentially scrutinize an FLP because it gives you a discount on the business interest connected to the estate or gift tax return. It will look to see if this has substance and form.
It is important to be diligent about keeping your records and following proper procedures when creating an FLP. When FLPs are not generating the estate tax savings that are desired, it’s often because the originator paid for a lot of documents to be created and didn’t live with them and make them part of the ongoing planning.
To do it properly means careful coordination with the lawyer who will draft the documents, the accountant who will advise you on tax law and other tax matters, and the wealth manager or planner who helps design the plan on the front end and maintains it on an ongoing basis.
Considering all the new 401(k) plan disclosure rules being issued on plan fees and expenses, how can a business owner avoid the risk of personal liability and make sure they don’t unintentionally violate these requirements?
For business owners, this is a bit of a minefield. In some cases, you might not realize you’re walking through it until it blows up. Generally, regulators look for a good-faith climate of compliance. The important thing is to document everything appropriately and leave a clear trail that shows you are trying to be in compliance.
The government often has a more favorable attitude if it can see you are trying to comply. It doesn’t want to see neglect, so intent goes a long way. It’s an area where, depending on the size of your 401(k) plan, you may need legal counsel to advise you on those policies and procedures.
J. Harold Williams, CPA/PFS, CFP, is president and CEO, Linscomb & Williams, an affiliate of Cadence Bank. Reach him at (713) 840-1000 or email@example.com.
Insights Banking & Finance is brought to you by Cadence Bank
While the new wave of banking regulation may portend of doom and gloom to some, there is still a light at the end of the tunnel for many businesses.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed two years ago as a result of the economic downturn, contains about 400 new regulations for the banking industry.
“That’s a significant increase in regulation for the industry,” says Paul Murphy, president and CEO of Cadence Bancorp LLC. Some of these regulations, he says, go beyond where the problems existed and into areas that were already well regulated, which could potentially lead to over-regulation. In addition, Basel III, the new capital standards guidelines for the international banking community, will begin to be phased in over the next three years. By 2015, all banks will be required to have the same definition of and same types of capital requirements, which theoretically will create more stability in the system. This means that banks will need more capital to do the same amount of business that they did prior to the changes.
“The question becomes, ‘How are you going to raise the capital required to be in compliance?’” says Murphy. “Over time, banks will have to charge a little more than they have been and their net interest margins will have to be wider to provide for the additional capital requirements. And while we are concerned about too much regulation, the safety of the financial system is key to America’s growth. I believe the regulators are aware of these issues as we move through this process.”
Smart Business spoke with Murphy about the regulatory climate for banks and how it will impact small- to mid-sized businesses seeking loans.
What has been happening to small banks?
The number of banks sold in 2010 was 130, and 118 of those had less than $1 billion in assets. In 2011, 124 banks were sold, and 112 of them had less than $1 billion in assets. This year so far, 83 banks have sold, and 74 had less than $1 billion in assets.
The trend is compelling — small banks are going away and very few new ones are being chartered. Banks are getting bigger because they can effectively spread the cost of regulations across their base of assets. Bankers are in the midst of coping with these regulations, which ultimately will continue to drive banks to merge or to acquire smaller banks because the cost of compliance is significant.
How will the new regulations impact businesses?
The concern for business owners is that, as banks become more regulated, it stifles the industry, inhibiting banks from taking reasonable risks, and reasonable is an important word. You want a banker to believe in your business and support you with good loans at good rates. But if banks become too concerned about regulations, it could limit their ability to provide credit products.
Credit is the lifeblood of our economy. A healthy banking industry that is well capitalized and responsive is desirable because loans to businesses mean jobs. Banks are a critical part of our economy, and having healthy banks can lead to job creation. It is understandable why some people think there is less credit available today than there was in 2007. What is likely the case, however, is that, prior to 2007, the United States experienced credit excess, and today, we’ve settled back into modest credit availability. While some start-up businesses might not qualify for certain loans based on their risk profile, good borrowers and healthy businesses are still being funded.
How can the consolidation of banks to strong regional enterprises help small- to mid-sized businesses in this highly regulated environment?
Regional banks are big enough to have a range of products and services, work in diverse geographies and have strong capital that leads to a larger loan limits. Further, regional banks are well hedged across investments, which offer a stable, balanced platform. The size of these institutions also results in more competitive pricing when compared to smaller banks.
Also, in today’s economy, technology is critical to businesses. Regional banks can afford to invest in technology because they can spread the cost over a larger base of customers and they’re incentivized to make further investments because it can lower the customer’s cost of doing business. Banks can be true technology partners.
How can a bank help businesses operate more efficiently?
Banks can help businesses though the smart, effective use of technology. Technology lowers costs, improves controls, reduces paperwork and mitigates risks such as fraud.
For example, business owners who worry about security over the Internet should be aware that the 128-bit encryption has not been broken and has protected banking and many other data transfers across the Web safely and effectively. Further, with technology, you can have fraud protection software scanning for irregular transactions. Generally, data moves faster, account balances post quicker and more information is available to the owner of the accounts, which ultimately means greater security.
Knowing what is happening with your accounts on a more timely basis allows you to mitigate fraud. Banks can also ensure a company’s money is working for that company all the time, whether it is through such enhancements as an accounts receivable lock box or an accounts payable lock box.
Outside of banks, how else can a business acquire the capital it needs?
Another primary channel for small- to mid-sized business loans is in the private equity investment community, where you go to a group of investors who have raised capital for the sole purpose of investing. There are also angel investors, which can include family and friends willing to invest in your company.
Businesses can also get financing through factoring companies and leasing companies, which provide capital for equipment.
Paul Murphy is president and CEO of Cadence Bancorp LLC. Reach him at (713) 871-3901.
Insights Banking & Finance is brought to you by Cadence Bank