Using cash-management tools to increase cash position.

• Author: Wendel, Charles B.
• Position: Treasury

Preserving and growing a company's cash position has become increasingly critical for many firms facing slower payments from customers and reduced funding availability from banks.

Companies need to speed up the process for getting cash into their bank accounts while--at the same time--slow down the process that moves cash elsewhere. Fortunately, companies can take advantage of several well-established approaches to increase cash flow and maximize its use.

Here are 10 tools financial executives should consider to improve cash flow:

1. Concentration Accounts. Banks can automatically transfer funds between accounts, combining dollars held in multiple collection or disbursement accounts. These accounts allow companies to control a larger amount of cash, thereby resulting in higher investment rates or reduced use of lines of credit.

   One bank offering such a service describes a customized capability; "Each day, after daily transaction obligations are met, [the bank] calculates your available funds and automatically transfers them into the investment or payment account you designate."

2. Controlled Disbursement Accounts. With controlled disbursement service, the bank informs the customer of its check-clearing totals early in the business morning, allowing the company to precisely fund its account with only the cash required to cover the day's disbursements. Excess funds can be used to pay down loans or for investment.

3. Corporate Cards. Many banks offer a "one card" payments solution, providing an accounts-payable solution for purchasing, travel and entertainment and fleet expenditures. An effective commercial card product can reduce pertransaction costs and streamline the approval process as well as reporting and compliance requirements.

   Important to corporate cash flow, corporate cards allow management to have greater control over employee T&E spending and reimbursement by setting limits and guidelines at multiple levels. It also allows for easier analysis of spending trends, resulting in more effectively managing payables.

4. Direct Debit. Just as consumers can agree to allow recurring payments to be automatically debited from their accounts, companies can introduce direct debit to their commercial customers who generate recurring payments. The benefits of direct debit include greater predictability of cash flow, elimination of most late payments and reduction in paperwork.

5. Electronic Bill Payment. Companies that pay online can select the date...