Knowledge Base - Cash Flow

Cash Management Tools That Add Real Value Available From Your Bank

When we think of a banking relationship, most often we think of checking accounts and borrowing money. Over the years banks have expanded their services to provide more value to their customers.

Below are descriptions of some of the common services in the Cash Management / Treasury area. Different banks may use different terminology but the concepts are similar.

  • Account Reconciliation – banks provide a variety of tools to assist in account reconciliation. These services range from sorted lists of cleared checks to complete reconciliation if the customer provides an electronic file of checks issued. Some banks can provide electronic files of checks cleared that can be imported directly into accounting systems like QuickBooks.
  • ACH Blocks and Filters – ACH (Automated Clearing House) is the central system in the United States for processing financial transactions. A customer provides their bank with a list of entities that are authorized to debit or credit their account through the ACH system. The bank will match transactions to the approved list and reject any that are not included. Normally, banks can place a complete block of all ACH transactions on an account.
  • ACH Tax Payments – many tax payments including federal income and payroll taxes can be paid on-line through the ACH system without issuing a paper check.
  • Cash Concentration – this service is for businesses that have cash deposited in different banks and different locations. A process can be set up to have these funds transferred to a main account on a predetermined schedule.
  • Check Images on CD – Since paper checks are no longer returned with your monthly statement, many banks will provide you with a CD containing images of all checks that clear during the period.
  • Check Images On-line – Many banks, as part of their on-line banking service provide an on-line image of cleared checks.
  • Credit Cards – some banks issue credit cards which can be used to track and segregate disbursements by employee.
  • Direct Deposit – a common service to transfer payroll funds directly into an employee’s bank account through the ACH system
  • Disbursement Notification – bank provides a daily notification, typically by mid afternoon, of all checks that will clear against your account that day. This eliminates the need to guess at the amount of “float” needed to cover outstanding checks.
  • E-mail Notification – a variety of events can trigger automated notification to allow the customer to better manage their cash.
  • Funds Transfer – allows the on-line or telephonic transfer of funds between accounts or to make debt payments.
  • Letters of Credit – there are different types, but in general a Letter of Credit guarantees payment to a vendor. Most commonly used in international transactions. The bank will normally require that the customer has availability on their Line of Credit to cover the amount.
  • Lockbox – you request your customers to remit directly to your “bin” at the bank. The bank deposits the checks and forwards to you the remittance information. This normally results in getting cash receipts into your account quicker.
  • Merchant Services – allows a company to accept debit and credit cards for payment.
  • Positive Pay – a fraud prevention service where you forward to the bank a listing of all checks (payee and amount) that are issued. As checks clear, the bank compares to the list and seeks authorization before paying any that don’t match.
  • Remote Deposit – allows a bank customer to scan checks received in their office. An electronic file is created representing the deposit and transmitted to the bank. This eliminates the need to physically travel to the bank to make deposits.
  • Sweep Accounts – set up to automatically transfer funds based on a set schedule and defined parameters. For example, each night the balance in the account over a fixed amount is transferred to pay off the line of credit or is transferred into a short-term investment account. Similarly, if the account drops below a set amount a draw on the line of credit is initiated.
  • Wire Transfers – allows payments to be processed quickly eliminating the postal delay of paper checks.
  • Zero Balance Accounts – usually used for deposits in a remote location. On a predetermined schedule any funds in the account are transferred to the company’s main account.

If any of these services would address a need in your business, I am sure your banker would enjoy hearing from you.