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What are cash management services in banking?

What are Cash Management Services in Banking?

Every business needs cash. You need it to buy inventory, pay employees, and settle debt. However, it’s not just about having enough cash – it’s about having access to the right amount of cash at the right time. 

That’s why cash management plays such an important role in the success of your business.

What are cash management services?

Cash management services are when a financial institution offers advising and various tools to optimize your business’s cash flow. The goal of these services is to maximize liquidity and reduce the cost of doing business.

Having a banking partner that can help you with cash management can make a marked difference in your company’s growth. Plus, the risks of poor cash management are high and put you at risk.  

How cash management helps businesses thrive

With proper cash management, you can accurately forecast future financial performance. You’ll have a better sense of when funds are coming and going. This helps you streamline the collection of accounts receivable and anticipate accounts payable. 

Cash management not only enhances the health of your business, it also can improve relationships you have with vendors, employees and others who rely on you; and allows you to be proactive in growing your business, rather than reactive. 

Accurate Forecasting

By regularly monitoring cash flow, you’ll begin to identify trends and patterns that lead to better business decision making. Being able to identify when and where there may be cash surpluses or shortages allows you to anticipate what’s coming and plan accordingly.

Having a cash management system in place that regularly monitors your financial data will put you in a position to make informed decisions about the future of your company. Accurate forecasting means you can delay certain purchases until more funds are available, prioritize the payment of certain bills over others, or take advantage of market opportunities as they arise. 

Streamlining A/P and A/R

Cash management services can streamline the collection of funds through electronic payment systems

At Crown Bank, we offer cash management systems such as Automated Clearing House (ACH), online payment portals, and even our own mobile app to streamline how you receive payments from customers. 

Electronic payment systems make it easier for your customers to make payments and get reminders about payments that are overdue, without you having to manually intervene. This contributes to timely payments which, of course, helps improve overall cash flow. 

Electronic payment systems also make it easier to handle accounts payable. At Crown Bank, you can set up recurring payments through our Bill Pay Service to save you time and money. This reduces the risk of late payments and creates more ease for you as a business owner. 

Improved Business Relationships

Cash management services don’t directly improve your business relationships, but it is a natural side effect. 

Through accurate forecasting and streamlined payment systems, you are far more likely to consistently meet your financial obligations. That may be paying your  employees, vendors, and debts on time, or even providing larger dividends to investors. 

A business that always meets its financial obligations is one that’s respected in the community. Not only should that be a source of great pride, but it can also help you strike better deals with vendors and lenders

The risks of bad cash management

While good cash management practices provide growth and opportunity for your business, bad cash management can do just the opposite. If you don’t properly manage your cash and develop insufficient cash flow, your company can become more susceptible to fraud, and develop poor relationships with key stakeholders. 

Insufficient Cash Flow

Having insufficient cash flow has created more sleepless nights for business owners than almost anything else. Without solid cash flow, you might not be able to pay employees on time, invest in opportunities for growth, or pay off urgent debts and bills.

This can be a panic-inducing situation for many business owners. If you don’t properly collect and manage your cash flow, it can make everything else really challenging. It’s hard to take strategic risks and do the things you need to do to give your company a competitive edge when you’re worried about not having enough cash. 

Increased Vulnerability to Fraud

Poor cash management often stems from not closely monitoring your financial data on a regular basis. This can lead to internal financial misconduct such as embezzlement and unauthorized use of funds as your finances aren’t being checked for irregular patterns and trends. 

Not closely monitoring financial data also makes you susceptible to external threats such as scams or fraudulent invoices because you don’t have the proper oversight to detect anomalies.  

A Bad Reputation

While healthy cash flow can help you build a solid reputation in your community and give you an advantage when making deals. Unfortunately, the exact opposite is true with mismanaged cash flow. 

If you’re unable to pay your employees, you’re going to lose your best talent. If you’re unable to pay vendors and lenders on time, you can develop bad business credit

With bad credit, you may not be able to get the cash you need when business is slow or there’s an economic downturn. If you do manage to get credit despite poor cash flow, the terms may not be very favorable to you due to a history of not paying on time. 

How does the right bank help with cash management?

Finding an experienced and reliable banking partner can help you manage cash flow and set your company up for financial growth.

At Crown Bank, we offer a variety of cash management services to help you optimize cash flow, build your reputation and protect your assets. In addition to ACH and online payment options, we also provide business credit cards, positive pay fraud prevention, escrow services, lockbox services, and more.

While we take pride in the wide range of modern tools and services we offer, it’s not what makes us unique. What makes Crown Bank special is our people. We still believe the best thing a bank can offer is compassionate professionals that have a vested interest in not only your business, but you. 

Talk with a banker today about cash management services. We look forward to supporting your growth.