Keep Cash Flowing

How to manage your company’s cash flow through online and mobile banking

Interviewed by Leslie Stevens-Huffman

Is cash more important than profits? It actually may be, as profitable companies fail every year simply because owners don’t have enough cash to pay their bills.

The problem is so pervasive that the U.S. Small Business Administration cites insufficient capital as the No. 2 reason that small businesses fail. And insufficient cash flow may keep owners from making advantageous hires or acquisitions, or even from receiving a paycheck.

“It’s easy to lose track of cash when you are under stress and juggling multiple responsibilities,” says Pamela Glass, project manager and mobile and online banking expert with California Bank & Trust. “Fortunately, cash flow management doesn’t have to be a burden or an afterthought thanks to the availability of online and mobile banking.”

Smart Business spoke with Glass about the ease and advantages of managing cash flow through mobile and online banking.

What types of transactions are available through mobile and online banking, and what are the benefits?

Almost any banking transaction can be initiated over the Web or from a smartphone using a mobile application, giving business owners the opportunity to seize control and hang onto their cash longer. For example, instead of waiting to go to the bank, owners can make deposits any time and control the timing of invoice payments from anywhere in the world using their mobile device.

They can transfer money from a general account into a payroll account right before payday, schedule vendor payments, or pay sales and payroll taxes on the due date by initiating ACH transactions. Essentially, they have the ability to view and manage their company’s cash position at their fingertips 24/7.

How does online banking improve the accuracy and convenience of cash flow forecasting?

Business owners don’t have to wait for their monthly statements to arrive to close the books or reconcile accounts. Now, they can forecast cash flow, analyze trends and make advantageous moves by downloading transactions and e-statements over the Web. They can then import the information into accounting programs such as QuickBooks™ or Quicken®.

Having instant access to credit card transactions, loan balances, deposits and invoice payments helps business owners estimate cash conversion cycles, identify cyclical revenue trends and spot opportunities to put excess cash to work. Some owners have used the information to improve cash flow by offering clients discounts or other incentives for quick payments, while others have offset seasonal downturns by offering customers complementary services. Still others have launched month-end sales to reduce inventory and raise cash before large invoices come due. Online banking evens the playing field between small and large businesses by giving owners access to the same data and sophisticated analytical tools enjoyed by Fortune 500 CEOs without the hefty price tag.

How can owners use online bill pay to improve cash flow?

Online bill pay gives owners the tools and the confidence to negotiate discounts by making bulk purchases or paying bills on time. Because they always know their company’s cash position, owners can schedule payments in advance, wire funds or tap a line of credit to pay invoices. In addition, they can cancel or delay a payment if there’s an issue with a vendor’s product or service, and they can control cash outflow by giving employees specific authority levels and approving transactions online. Online bill pay reduces fraud, the number of errors and late payment penalties by making it easy for multiple people to review and approve every transaction.

How can business owners control cash by monitoring transactions online?

Owners can improve cash flow by tracking incoming wire transactions and initiating collections calls to tardy customers, or they can discuss a client’s payment history and terms during a visit by accessing data from their smartphone. Essentially, there is no reason to wait for payment when clients can pay invoices electronically or via credit card, and owners have the ability to monitor transactions online. But if a client wants to pay by check instead, owners have the ability to deposit the funds into their bank account on the spot from their smartphone.

From a business owner’s perspective, time is money, so one could say that online banking is a windfall. Employees can initiate transactions, balance accounts and make deposits right from the office, and owners can pay down loan balances, check credit lines or approve transactions from cabs, airports or coffee shops. Visits with a banker can center on strategy, revenue-generating opportunities and relationship building instead of on routine banking transactions.

Is online banking more expensive than traditional banking services?

Online banking costs no more than traditional services. In fact, it is more cost effective when you consider the cost of checks, postage, gasoline, employee time and travel. How much will you save by reducing days sales outstanding by a few days, paying down debt or avoiding fees and penalties by paying your bills or taxes on time?

Do business owners need a connection to process mobile or online transactions?

Online banking is accessible over the Internet or mobile Web. Mobile banking is available through providers such as AT&T, Verizon, T-Mobile and Sprint on a variety of devices, including BlackBerry, iPod Touch, iPhone and Android*. Given the convenience and ease of online and mobile banking, there is no reason why cash flow management can’t be a simple, daily activity.

PAMELA GLASS is a project manager and mobile and online banking expert with California Bank & Trust.

*Standard message and data rates may apply.

Related articles: