Cash Management key to business efficiency

by Andrew Kittleson For The Review

Many business owners spend significant amounts of time – and time means money – managing their cash flow. One of their most common concerns is the daily operation of managing cash flow and security.

Time and cost – How can I collect cash efficiently and securely?

Cash position – How much do I have to fund my operation? Where is that cash and how can it be accessed?

Receivables – Who owes me money and how do I receive payment?

Payables – To whom do I owe money and how can I pay them?

Risks – How can I prevent fraud from affecting my cash flow?

These are entrepreneurs who have a business to run – they need to focus on sales, service or products and the dozens of other priorities that arise each day. Cash is the lifeline of their business, but managing it must be balanced with other responsibilities.

Many business owners use online banking to streamline their operations, which makes it simple to coordinate multiple bank accounts and services such as payroll, monitoring payments, handling electronic deposits, balancing requests and electronic transfers.

But that is just the start of services that can increase efficiency.

One of the most useful cash management tools available to business owners is a sweep account. With this type of account, a business’ daily funds are automatically transferred to and from an operating account or line of credit as needed. You don’t have to spend a portion of each day analyzing your receivables and payables to determine how much cash you need or have available.

Additional Cash

Management Tools

An electronic funds-transfer system run by the National Automated Clearing House Association (NACHA), this payment system deals with payroll, direct deposit, tax refunds, consumer bills and many more payment services. Banks can accept transmission of payment information for processing to the Federal Reserve System for companies that transmit their own NACHA formatted files.

Remote Deposit

This check clearing tool allows you to make deposits from your business without having to physically deliver the checks to a bank. Instead, a business owner scans checks remotely and transmits the check images to a bank, usually via an encrypted Internet connection using a PC or laptop. When the bank receives a check image, it posts the deposit to the customer’s account and makes the funds available according to the busi- ness’ plan. For smaller deposits, talk to your bank about tablet or smart phone deposit options.

Wire Transfers Many banks use FedWire for both incoming and outgoing wire transfers. Formally known as the Federal Reserve Wire Network, FedWire is a real-time gross settlement funds transfer system operated by the United States Federal Reserve that enables financial institutions to electronically transfer funds.

Check Imaging

A process in which digital images of each check are captured and stored on disk. The images are delivered in monthly statements, and can be accessed if copies are needed later.

Check Reconciliation

This automated service allows business owners to reconcile monthly bank statements quickly and conveniently. An electronic file can be generated and forwarded for use or a transmission of the paid items can be sent directly for posting.

Lock Box Services This service is provided by banks to businesses for the receipt of customer payments. Under the service, the payments are directed to a special Post Office box, rather than to the company. The bank then retrieves the payments, processes them and deposits the funds directly into the company’s bank account.

Avoiding Fraud

According to the 2015 Payments Fraud and Control Survey by the Association for Financial Professionals, 62 percent of companies experienced payment fraud in the previous year. While check fraud is still the most common method at 77 percent, wire fraud has nearly doubled since 2013 to 27 percent, and credit and debit card fraud is at 34 percent.

Having controls in place to protect your business’ banking accounts is critical. Some of the most successful ways to steal money can involve something as simple as email.

In a typical scenario, hackers gain access to the email account of a business owner or key employee and send an email to a comptroller or other accounting employee indicating there is an urgent wire that needs to be sent to a specific account. Because the email appears to be authentic, wire transfers are frequently completed before the fraud is detected.

There is no guarantee hacking can be prevented, but one key is to accept that it can happen to you and your business—and take precautions. The 2014 Global Fraud Study by the Association of Certified Fraud Examiners found that a typical business or organization loses five percent of revenue each year to fraud, with a median loss of $145,000. Smaller businesses are more vulnerable and suffer disproportionally bigger losses. The median discovery time to detect fraud is 18 months after it began.

Fraud Prevention Tools

Positive Pay

Designed to deter check fraud, banks use positive pay to match the checks a company issues with those it presents for payment. Any check considered to be potentially fraudulent is sent back to the issuer for examination.

ACH Blocks and Filters

This web-based service gives business owners the ability to detect check and wire fraud. Daily notifications via text or email of ACH debit activity on their accounts provides the ability to flag and return unauthorized ACH debit transactions.

Tips to Protect Your Business from Fraud:

Utilize a dual control process for money movement.

Never send money from your account solely based on an electronic request.

Use separate email addresses for personal/company business.

Always type the bank’s web address into your Internet browser (avoid cutting and pasting from a link).

Never provide sensitive information over the phone unless you placed the call or are sure you are speaking with the correct party.

Immediately report suspicious transactions or activity.

Making use of these tips and tools, many of which are available at a bank or other financial institution, will not only help business owners manage their cash, but also help run their businesses more efficiently and securely.

Andrew J. Kittelson is Vice President Commercial Lending for Wisconsin Bank & Trust, Member FDIC


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