Ask your banker about ideas that can deliver big results.
Optimism is on the rise among business owners, who are looking to expand operations, hire new talent and purchase new equipment. They’re also looking for new ideas, and one of the best sources for new strategies is their banker.
After all, bankers should be bringing more to the table than monthly reports or the weekly “how’s it going” call. They should be strategizing with business owners on how to expand operations, create more efficiencies and generate more revenue. More than any other business partner, bankers are the ones who should understand every aspect of a business, from cash flow management to risk assessment.
Here are a few areas where bankers can help businesses strategically grow and profit in today’s economy.
Business Strategies from Your Banker: How Does Your Cash Flow?
Most business owners talk about the importance of cash flow, but not many go deep into the process and determine how to make it better. Businesses need to ask questions such as: How many days does it take to collect on receivables? How long are you paying on collectables? Are you getting discounts for paying early?
A lot of companies are duplicating internal steps or making extra steps to receive money. It costs $2 to $5 to mail a check, whereas sending an Automated Clearing House (ACH) payment costs less than $1.
By working closely with a banker, businesses can gain cash flow relief and create better efficiencies in their operations.
Business Strategies from Your Banker: Risk Management and Efficiency
Anything businesses can do to manage risk will ultimately benefit their bottom line. This includes having dual controls with employees, doing regular inventory checks, having different people sign off on checks and having a process to detect and deter internal and external fraud. So much risk can be diverted simply by paying attention to the small, everyday details.
Often, businesses can outsource certain functions to save time and money—for example, by working with a payroll provider. The provider may also accept tax liability so the employer isn’t responsible for tax penalties.
For companies with large receivables, it may be more efficient to have a lockbox or outsourced collection system. With a lockbox service, a company’s customers can mail their payments to a P.O. box operated by the bank, which will process the payments and deposit them in the company’s account—without the company needing to get involved.
Business Strategies from Your Banker: Creating Operational Efficiencies
Bankers also can help a business create operational efficiencies in several areas, including payments, cash flow cycles, commercial cards and reconciliation.
One example is the process of purchasing equipment. As businesses expand their work, make repairs or replace units, they may find themselves making multiple purchases throughout the year. Rather than go through the process of taking out a separate loan for each investment, companies should map out their anticipated needs for the year and take out a line that will cover all potential investments. Not only will this save time, but it also provides flexibility to buy new or used equipment and to proactively plan for capital expenditures they may want to make during the year.
Purchasing cards—a special kind of charge card for company purchases—are another item to consider from a processing standpoint. Not only does the right program provide valuable rewards, but it also cuts down on check writing and provides increased flexibility
in cash flow. Additionally, it creates a more streamlined tracking system for accounting departments. By allowing job numbers to be attached to specific expenses, companies can easily allocate costs to the appropriate projects.
By working closely with a banker, businesses truly have the opportunity to expand and grow through creating efficiencies in areas they never knew could be improved.
