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Feb 4, 201608:55 AMOpen Mic

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Cash management key to business efficiency

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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

Automated Clearing House (ACH)
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 business’ plan. For smaller deposits, talk to your bank about tablet or smartphone 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.

(Continued)

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