Executives at large companies often envy the nimble execution of business strategies at smaller firms. But the truth is, small businesses have to execute quickly because they're chronically short on resources, particularly cash.
Many small business owners devote extensive time and energy trying to manage and speed up accounts receivable and accounts payable. Their time can be better spent sealing business deals and bringing in new clients.
“What many are learning is they can operate more efficiently if they automate their cash flow, freeing-up their leaders to explore new markets and take the company to the next level," said Christian Santaniello, senior vice president and head of Treasury product management at City National Bank.
“Online platforms that link bank accounts to accounting software, such as Quickbooks®or NetSuite® , can help eliminate the need to do double-entry for invoices and streamline the process of paying vendors and getting paid by clients," he said.
Cash management services have other advantages:
Fraud detection features help employees to confirm that a check has been cashed by the payee - and for the correct amount. If something isn't right, under certain circumstances the business can elect to not have an item paid and have its account credited.
Security functions, like requiring a payment approver to use a passcode, are designed to help keep fraudsters from accessing the company's banking services and emptying its bank accounts.
“Even a small thing can be a great help, like having easy access to the company's cash balance on an online dashboard," said Frank Rojas, senior vice president and regional sales manager at City National Bank. Because accounting employees often start their workdays by checking that balance, "the dashboard becomes a gateway into figuring out if they need cash or if they have excess cash, and it sets the agenda for what they need to do from there."
An online cash management system can also help stop minor inconveniences from turning into major disasters.
Small companies often have one person handling accounts payable. If that person is out sick or forgets to send that week's accounts payable file in advance of the due-date, vendors won't be paid.
Automated cash management can save the day with a well-timed same-day ACH or wire transfer payment. The system sends an email alert that a payment is awaiting approval online. The approver can then log in via mobile phone or tablet and click “approve" from almost anywhere in the world.
Here are six things to look for in an automated cash management system:
- An intuitive, user-friendly financial interface that is easily accessible from mobile devices. It should integrate with your accounting software and allow you to view transactions in various phases of processing and approval.
- The ability to easily select bills to pay, schedule payments and choose a payment method, such as check, ACH or wire transfer.
- Quick and easy visibility into transaction history for specific vendors as well as on an aggregate “big picture" level.
- Transaction-matching capability that shows which transactions have cleared your account and compares them to a list of approved payments.
- The ability to scan checks and click “send" to deposit them in your account electronically.
- The ability to run reports for auditing purposes and request customized reports for specific needs.
When you're looking at options, ask about the safety and security of services provided. You want to ensure your business - as well as your employees, partners and clients - are protected.
And make sure that your bank or service provider is equipped to provide quick, high-quality assistance with your questions or service issues.
“Small businesses may have a pretty slim cash margin to deal with," said Santaniello. “The ability to automate a deposit can allow a business to receive money faster and have cash on hand to pay their obligations sooner, preserving good relationships with their vendors."