Growing businesses are overlooking treasury – and putting themselves at risk

The economy has rebounded despite COVID-19, and although the heightened business activity is a good thing, it can come with growing pains. In any environment, companies must contend with increasingly complex cash flow needs as well as becoming attractive targets for fraud. The pandemic threw an additional wrench in the works as remote work arrangements pushed quick adoption of electronic payment practices.

“We’re seeing a promising boost in the economy, but now businesses are facing a new set of challenges converging as companies move more money around,” said Jeff Arbizzani, First Interstate Bank’s Director of Treasury Solutions Delivery. “Issues caused by a deficient treasury management system could result in major losses and security breaches.”

Businesses may not be aware of an ally for addressing these challenges and fueling success: their bank’s treasury management team. Engaging treasury management can support businesses in four critical ways: moving, earning, saving, and protecting money.

Move money efficiently

Companies typically seek a bank’s treasury management services to assist with cash flow, particularly accounts payable and receivable. Prior to the new work-from-home reality, many local businesses retained traditional, manual methods of paying and depositing funds. These methods can be labor-intensive and lack controls and security features that today’s treasury solutions offer.

When banks closed to foot traffic early in the pandemic, businesses widely embraced electronic methods, such as ACH and wires, to ensure timely payment of vendors and employees. By implementing dual-control protocols — where at least two individuals must review and approve transactions — companies gained greater control and visibility to exiting funds. For deposits, remote services allowed businesses to scan payments as received, including same-day posting even after normal banking hours.

Additionally, more regional and community banks are offering built-in efficiencies, such as providing connectivity with a client’s accounting software to support greater automation. With more efficiency, companies save time and money while potentially benefitting from more value-added activities, such as active cash management and fraud mitigation.

“Despite the risks that come with greater cash flow, there is some hope,” Arbizzani said. “Treasury management support is available, and trusted banking partners can help by offering the programs and products that will keep businesses from becoming compromised while also maximizing earnings.”

Generate earnings on cash

In the current low interest rate environment, organizations that retain large cash balances have options when it comes to putting that cash to work. For example, municipalities and nonprofits may be required to maintain significant reserves in extremely safe vehicles. Such organizations can work alongside a treasury manager to explore options such as sweeps.

With certain sweep products, businesses can invest in high-quality securities overnight before sweeping out the next morning. This practice introduces potential to realize more earnings on a deposit without compromising its safety or security.

Realize cost savings

Working with a bank’s treasury management department can help generate real cost savings for businesses. Beyond introducing efficiencies, a treasury partner can help analyze and forecast cash flows to take speculation out of financial plans and potentially reduce costly errors.

Additionally, treasury management may offer other types of sweep products that enable businesses to save money in terms of interest payments. Businesses using a bank’s ACH services, for example, could use a line of credit and a zero-balance checking account to help reduce total interest payments. Any accounts receivable could be directed to a business’s line of credit to lower the outstanding balance and thus the amount on which interest is charged, reducing total interest paid.

Protect assets against fraud

Finally, as businesses grow, so do the opportunities for fraud. As businesses expand their networks of clients and partners, they take on added risk by engaging with unfamiliar parties. When an operating account is compromised, it wreaks havoc throughout the organization and pulls valuable resources to cover mounting costs.

In 2020, 74% of organizations fell victim to payment scams, but there are processes and procedures that can help businesses mitigate fraud. Treasury managers can help set up dual control or positive pay, which adds extra layers of review for transactions, or advise on other potential security solutions. Some security measures require a fee, but like life insurance policies, the reassurance is priceless.

Schedule a relationship review

Businesses should capitalize on relationship reviews with their banking partners, who can present various products and services appropriate to their evolving needs. Organizations expanding at a fast pace could be outgrowing their product portfolio and missing opportunities to streamline and secure operations. Meeting with a treasury team member can help businesses prepare for long-term success.

To learn more, contact a First Interstate Treasury Solutions Representative at your local branch.