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Use technology to improve cash flow

Technology to Improve Cash Flow

Let’s face it, managing cash flow and liquidity can be tedious and maddening at times. Many small business owners are passionate about their work and not-so-inspired when it comes to the bookkeeping side of the business. The 2013 AFP Electronic Payments Survey reveals that challenges and constraints in this area continue to be a pain point for businesses. More than 70 percent of organizations are struggling to convert to electronic payments, citing IT barriers and slow adoption of electronic payments with customers and suppliers.

Even if cash management is not your strong suit, you can leverage technology and tools to help improve cash flow, expand opportunities for growth and perhaps even lower your costs.

“There’s no one size fits all solution for improving a business’ cash flow,” says Gary Green, CB&T Executive Vice President and Commercial Banking Manager. “Often cash management and credit options are customized to an individual business based on their industry, size, and how it receives and make payments. The right solution will save your business time, money and hassle.” 

Here’s how to get started:

Identify pain points

What is dragging you down? What could be improved next month or next year? Analyze how purchasing, payments and receivables are managed to help you identify areas that can be streamlined and automated using cash management tools. You may find that improving cash management largely comes down to two basic tasks: speeding up collections and efficiently processing payments.

Match the tool to the task

How to speed up accounts receivable (AR) processing: Making the move to electronic billing is a quick fix that can save time and money. Consider emailing bills that can be paid through automated clearinghouse (ACH) transactions vs. mailing invoices for check payment. The typical organization received 50 percent of B2B payments by check in 2013, compared to 75 percent in 2004, according to the AFP Electronic Payments Survey.

For those customers who insist on check payments, you have a couple of options:

  • With lockbox services, all receivables are routed to a post office box assigned to your bank. Checks are processed and automatically credited to your account each day. This reduces the need for your staff to open envelopes, prepare deposit slips and get them to the bank.
  • Using remote deposit capture, checks can be securely scanned in and deposited to your account by your staff. Remote deposit capture is a snap to use and eliminates extra trips to the bank.

How to optimize accounts payable (AP): You may be able to automate AP to reduce the internal costs of processing payments and watch for patterns when significant outflows are expected. The following tips may help streamline your processes:

  • Convert paper invoices to electronic versions upon receipt.
  • Set up a system that automatically matches purchase orders against invoices to avoid overpayments and flag incorrect or fraudulent vendor invoices.
  • Make sure that AP data is immediately visible to your cash management team so they can use the information to forecast, plan and adjust as needed.

One in five organizations makes the majority of payments through electronic means, and just under half plan to convert the majority of B2B payments to electronic payments in the next three years. Where does your business stand with electronic payments? Are you moving in the right direction? Take advantage of online banking tools for small business and lean on experts who can help get you on track with treasury management solutions.

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The information contained herein may not represent the views and opinions of California Bank & Trust or its affiliates. It is presented for general informational purposes only and does not constitute tax, legal or business advice.
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