Automating treasury management to maximize liquidity.

Electronic treasury management solutions are giving companies efficient new ways to control and manage their cash. Company treasurers who strategically combine traditional treasury management services, such as information reporting and lock box processing, along with new electronic remittance and disbursement solutions, can help their businesses achieve greater liquidity, operational efficiency and cash control.

Going paperless is one route to consider. While paper checks are subject to delays, uncertainty and fraud, automated methods of fund collection and payment provide companies with more control over when their payments are disbursed and faster access to receivable funds. By automating their accounts payable and receivable systems, companies may also realize opportunities to reduce errors and costs associated with manual processing of checks and decrease their exposure to the possibility of check fraud.

If a company's needs or operating environment isn't suited for fully automated remittance and disbursement, there are intermediary options. For instance, some treasury services enable companies receiving paper checks to convert them so that they become electronic payments that no longer depend on being physically transported and presented to the paying banks.

Electronic Payment Solutions

Instead of using paper checks, companies can take advantage of the Automated Clearinghouse (ACH) network, a nationwide credit and debt transfer processing tool. Companies rely on the ACH network for payroll and employee expense reimbursements and vendor payments. Organizations using the service can send a file with ACH payment information to their treasury services provider, allowing them to more easily forecast cash flows by controlling the settlement dates.

Purchase cards are another alternative to paper checks. Similar to corporate credit cards, they have built-in controls such as where they can be used, who can use them or how much can be charged daily. Depending on the employee cardholder, items purchased may be limited to office supplies, or they may cover travel and entertainment.

These transactions can be verified online, assigned to the appropriate cost centers and posted to the general ledger automatically. Reconciliation occurs daily, enabling the company to manage its credit exposure more efficiently.

Faster Deposits

A company that typically had to rush to the bank by 4 p.m. now has until 7 p.m. to make deposits. How? It eliminated the need for physical delivery of checks to its bank by using Remote Deposit Service to scan checks and send the bank electronic images for deposit. As a result, its payments post faster, and it has reduced days sales outstanding.

Remote Deposit Service also gives the company better control over deposit totals and cash balances, allowing its treasurer to make decisions sooner in the day about investing cash or using it to pay down credit lines. This service integrates smoothly with most accounting packages, allowing treasury to automatically export deposit data into its general ledger.

Remote Deposit Service is also well suited for companies with offices in multiple locations in the U.S. or abroad that receive U.S. dollar-denominated checks. One privately held homebuilder implemented Remote Deposit Service in 10 of its 14 metropolitan construction areas, which produce more than 1,400 checks a month.

This solution reduces the company's check-clearing time by up to four days, and saves at least a week in the deposit process, which previously took up to three weeks or more.

Imaging Technology's Assist

Image Cash Letter Service also uses imaging technology to send check information. The solution allows companies with large numbers of checks that may currently rely on paper cash letters to send an electronic image cash letter instead. One global business that implemented this service no longer has to physically transport dollar-denominated deposits from offshore to a U.S. bank. By eliminating transportation float, the company saves on substantial courier costs, and often has access to its funds as much as a week sooner.

Other evolving electronic services include PayMode[R] and ePayables. Pay-Mode is an all-digital, online accounts payable solution enables borrowers to send electronic payments to vendors and other payees, along with electronic remittance detail in formats that have been specified by the payees.

ePayables uses purchase card technology instead of wire and ACH. The service enables companies to initiate card payments on approved invoice amounts by sending an electronic file to their treasury services provider instead of issuing a "check run." Some companies may choose to integrate PayMode and ePayables and use the combined solution for ACH, wire and purchase card payments.

Jay Kane is Senior Vice President, Global Treasury Services, at Bank of America Business Capital (www.bofabusinesscapital.com). This article is adapted from the firm's CapitalEyes newsletter, July/August 2006.