Cash Management

We all know that in business cash is king.

Yet, managing cash is often difficult for small business owners who are busy with sales and marketing and managing the day-to-day operations of their businesses.

An effective cash management, or treasury management, system can give a business owner more time to focus on sales and increase profitability by putting cash to work, reducing the risk of fraud, and helping forecast and track cash flow.

Understanding three basic concepts of cash management can help a business thrive in good times and bad.

Use your cash position effectively. Companies that need to keep large amounts of operational cash on hand can benefit by putting it to use through overnight investments or through a daily paydown on a line of credit. A company can automate this process through use of a cash management sweep. Your bank can calculate end-of-day balances in a checking account and then “sweep” funds into short-term investments or use funds to pay down lines of credit.

Reduce the risk of fraud. Businesses that issue a large number of checks each month can use several cash management tools to help reduce the risk of fraud.

• Positive pay service gives you the control to minimize the payment of unauthorized checks. You provide the bank with your check issue information and the bank provides you with daily exception reports of those checks received for payment that did not match that issue information. A payment decision is required for each exception reported.
• Account reconcilement services simplify bookkeeping procedures and make checking account audits easier. Business owners can get customizable services with online reports that are flexible and can be implemented without major adjustments to a business’s existing accounting system.

Track cash outflows and inflows. A good cash management system consists of services that can help keep cash moving in the right direction.

• Online banking gives you access to your financial information day and night from your home, your office or on the road. You can review financial information, including transactions and images of paid checks, and you can transfer funds between accounts and initiate wire transfers. Look for an online banking platform that allows information to be saved to your local system or exported to other financial software and one that can be designed for your needs and is adaptable as your business grows.
• Automated Clearing House is a system of the U.S. Federal Reserve Bank that provides electronic funds transfer between banks. ACH is used for all kinds of fund transfer transactions, including direct deposit of paychecks and monthly debits for routine payments to vendors. Banks have cash management services available that allow for companies to initiate these transactions.
• Lockbox, or remittance banking services, can help reduce costs and improve cash flow for companies that receive payments through the mail. Lockbox services can make cash available sooner and reduce a business’s clerical time by acting as a processing house for receivables, collecting, processing and clearing customers’ payments.
• Credit, corporate, commercial and purchasing cards capture cash outflow data electronically, providing business owners with real-time information to track spending and verify transactions. Card services give business owners controls such as authority to set spending limits and establish liability while providing an additional purchasing option.

Cash management tools can provide significant benefits in terms of cost and time savings, but they do have associated fees. By understanding and using cash management concepts and products, small business owners can manage cash more efficiently while devoting more of their time to the growth and profitability of their business.

Michelle Di Gangi joined Bank of the West in 2008 as Executive Vice President, director of Small and Medium Enterprise Banking. She manages small business banking activities across Bank of the West's 19-state footprint and sets strategy for small business lending, including SBA lending, for the San Francisco-based bank.

She has been in banking for more than 25 years and has experience in commercial strategies, credit administration policies and procedures, and direct management of commercial lending. Prior to joining Bank of the West she was executive vice president and director of commercial banking at Greater Bay Bancorp, in East Palo Alto, Calif.  There she was responsible for building and leading a team focused on finding new lending opportunities and other business development initiatives.

Michelle began her banking career in 1983 with Wells Fargo's Commercial Banking group serving as credit and loan team manager. She later moved to Wells' Business Banking group where her roles included senior credit officer, area manager in the East Bay and in the San Francisco region, and executive vice president and division manager of Bay Area Business Banking.She can be reached at (415) 765-4875 or  Michelle.DiGangi@bankofthewest.com.

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