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Better cash flow from improved cash management tools.

No financial discipline is more important, and more misunderstood, than cash management. There are tools available to help businesses understand and implement cash management strategies, including how to maximize cash flow, assess their current cash position and evaluate investment account options.

Today's cash management tools are more user-friendly, with automated processes designed to compound efficiencies, provide added convenience and reduce risk. These tools save businesses time and money when managers take into consideration the gains from advances in sweeps, earnings credit rate (ECR), term investment deals, plus purchasing cards, remote deposit capture and payroll options.

Tools of the Trade: Liquidity Solutions

For businesses looking to effectively manage short-term cash, liquidity solutions--ECR, sweeps, savings accounts and term investment vehicles--are the best options. Liquidity solutions offer competitive returns to comparable investment solutions and afford bankers the ability to create custom portfolios with respect to a business's liquidity needs, investment objectives, risk tolerance and investment horizon.

Minimizing or possibly eliminating banking fees is one way for companies to maximize returns. Organizations should consider a managed ECR as a component of a balanced compensation program. ECR allows companies to offset some banking fees by allowing them to maintain a balance on their accounts.

Another option is the utilization of what are known as sweep accounts, designed to invest the excess money from an account once all payments have been made. Account types vary based on a company's needs. Some are designed for companies seeking maximum return on investment, while others are focused on providing maximum security.

Other liquidity options include fixed-income securities, savings accounts, certificates of deposit (CDs) and money market accounts. These term investment vehicles are structured for clients with core balances and do not require overnight liquidity or seek additional interest income.

Technology as a Cash Management Resource

Technology has essentially changed the way we bank today and serves as the platform for numerous cash management tools. These innovations have resulted in efficiency and savings to businesses.

Remote deposit capture, which some consider to be one of the most significant banking innovations in decades, has taken the market by storm. This technology allows businesses to utilize desktop scanning devices and software to capture images of checks at either an office or store location. Checks are then deposited by transmitting images to a bank instead of physically delivering the original paper items. Remote deposit capture has been widely accepted because it has:

* eliminated the need for multiple accounts at multiple institutions;

* eliminated time-consuming and costly trips to the bank;

* afforded the ability to make a deposit from one's own office or store;

* permitted extended daily deposit windows; and

* provided faster check clearing by making deposits earlier in the day.

Yet, the largest boon from this technological revolution is the ability for customers to use Web-based treasury technology. From anywhere in the world, treasury personnel have the ability to access their company's treasury management systems, accessing real-time data and reporting that manage disbursements, deposits and account reconciliation.

Other Cash Management Innovations

Cash management tools will continue to evolve as new technologies and business needs emerge. One such development includes the inception of card programs for purchasing and payroll.

Using purchase orders and paper checks is a tedious and time-consuming process for purchasing office supplies, travel or other business expenses. Purchasing cards, or p-cards, provide set dollar amounts to help control user spending. P-cards are a key component in one easy program that speeds the purchase cycle, minimizes paperwork and provides valuable insight into spending patterns through in-depth payment information.

Payroll cards, too, are a growing trend. Comparable to debit cards, these cards are a simple and cost-effective alternative to issuing checks for employee wages. They allow the employer to distribute wages via automated clearinghouse (ACH) direct deposit even when the employee doesn't have a bank account, reducing payroll costs and check-cashing fees.

The number of cash management resources available is vast, and each offers opportunities for gains in cash flows. However, it is important to speak with your banking partner to decipher which options are best tailored to your business needs. No matter what options you choose, cash management now has a strategic role in the arsenal of business tools needed to beat the competition.

Jose Mantilla serves as national sales director, Treasury Relationship Management, for KeyBank's Global Treasury Management group. He can be reached at 216.689.4321 or
COPYRIGHT 2007 Financial Executives International
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Title Annotation:treasury
Author:Mantilla, Jose
Publication:Financial Executive
Date:Oct 1, 2007
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