5 Treasury Management Considerations For Your Business

Proper treasury management ensures that your business always has access to the cash required to operate—and uses surplus cash efficiently. Healthy cash flow is king and should be a crucial focal point for any small business in Central Indiana and beyond.

Your cash flow strategy should always support your overall business strategy, and if it doesn’t, you need to make adjustments. Whether it’s expanding products and services or increasing your team to handle demand, cash flow has major implications on each and every financial decision you make. Ready to level up your business strategy? Consider these 5 important factors for your treasury management, and be sure to also check out the business bank articles inside our blog.

#1 How Cash Flows Into Your Corporate Bank Account

Cash flow is king when it comes to treasury management. Make sure you and your team ask these critical questions:

How do your clients pay you?
What payment methods are you equipped to accept?
Do clients ask to pay using other methods?
What are your payment terms?
What are your collection terms and processes?

There are various ways your clients may pay you—from cash and check to credit card and Venmo. Have you considered which one works best for your business? It’s important to make it simple, easy, secure, and fast. No one wants long waiting periods or unnecessary transaction fees.

Zooming out to your larger business strategy, treasury management includes converting customers from less efficient payment methods to other options that are efficient, cost-effective, and meet your needs.

Good treasury management may also include managing cash flow to better control the use of cash balances and increase earnings on these balances without incurring an unacceptable level of risk.

#2 How Your Business Pays Others

Whether it’s vendors, staff, contractors or any other means, every business needs a standard practice for how you pay bills and conduct payroll. Having a dedicated procedure that addresses these questions is essential.

How do you pay vendors and monthly bills?
Is your payroll process sound?
What sort of payment terms do you have with vendors?
Do you typically have enough cash on hand to pay monthly bills? If not, how do you handle shortfalls?

These questions all speak to another essential element of treasury management — disbursement. Disbursement is paying bills and other obligations in a timely, cost-efficient manner. On the other hand, if chronic cash flow issues impact when and how you pay others, it’s time to revisit your treasury management strategy.

Bottom line: paying people, partners, and companies on time and in full is good for business.

#3 Where You Go When Your Business Needs Money

As with many elements of business, planning is key in treasury management. Proactive entrepreneurs and business owners set themselves up for success by establishing lines of credit and strategic partners for business and commercial loans.

The reality is there may be times in running your business when it becomes a strategic move to pursue additional capital. Before that time comes, consider answering these 3 questions.

What is your liquidity like?
Do you have cash on hand?
Do you have access to a line of credit (or another form of credit) in the event you need funds?

Our team here at Citizens State Bank specializes in helping established, and emerging Indiana businesses secure loans and lines of credit that enable you to thrive.

And if you’re still considering what your cash flow strategy looks like, consider scheduling a free financial assessment. It’s one of our favorite ways to position you and your business for success.

#4 What Your Business Does with Cash Surpluses

Whether you’re asking these questions now or planning ahead for the future, it’s important to consider what you’ll do with surplus cash flow.

If you have money left after you pay your bills, what do you do with it?
Does it sit in an account?
Do you use it to pay yourself?

If you have a surplus of cash, that’s good! Use it! Be intentional with every dollar so they can be deployed to the most important areas of your business.

#5 How You Protect Your Business’s Cash Flow

Part of your treasury management strategy will consist of information and control around your cash flow. It’s important to maintain a system that ties together all of your cash flow functions and reflects all major movements of funds and account balances.

Consider questions such as:

What kind of handle do you have on your account/cash flow information?
Is the information easily accessible, or would it take you a while to gather and organize the information?
Who has access to this information, and how do you keep this information safe?
What kind of security is involved?
How do you ensure you’re using up-to-date security practices?

The Vocabulary of Treasury Management

When diving deep into your treasury management strategy, you will often need to have conversations with everyone who sits at your strategic table — CPAs, banking advisors, and more.

Here are several key treasury management terms that you’ll need to be familiar with when discussing that cash flow conversation.

Float: Money that is briefly counted twice during time gaps of registering deposits and withdrawals.
Sweeps: Accounts that automatically transfer funds into investment accounts at the end of each day.
Liquidity: Liquid assets a business will use to meet current and future debts and obligations.
Cash on hand: Funds that are available to a business after all costs have been paid. Generally, these are funds that can be available in less than 90 days.
Lockbox payments: A way to accept payments via a special PO box assigned to a business and processed by the bank.
ACH: An automated clearing house is a network for processing transactions between participating institutions.
Fraud protection: Strategies used by businesses and banks to detect fraudulent actions and prevent financial damage.
Assets/Liabilities: Assets are what your business owns and liabilities are what your business owes to others.
Capital: A business’s assets that have monetary value.
Equity: The value that would be returned to shareholders if a business’s assets were liquidated.
Profit/loss: A business’s value minus the cost of daily operations.
Cash flow projections - Estimations of income and expenses for a business over a certain period. Learn more about cash flow projections here.

Understanding not only what these terms mean but how they all fit into your cash management tool belt is key to taking control of treasury management.

Additional Business Banking Resources

Our team at Citizens State Bank wants you to know that you’re more than just a number when you bank here. We know people by name and stand by you at every step of your business’s journey.

That’s exactly why we’ve created a hub of business resources for leaders like you. And, we regularly refer our customers and clients to other trusted places like The Small Business Association Online Learning Center. They’ve also developed a myriad of helpful resources about business banking—including treasury management.

Pull Up a Seat at Your Table for Citizens State Bank

To ensure the success of your business, you need to have the right experts seated at your table of advisors.

If you have questions about treasury management for your business, take a look at the services we offer here and schedule a no-obligation conversation.

Our skilled Treasury Management Officers will be happy to take a seat at your table as one of your trusted advisers and help you determine what you need to make your business thrive.

Free Infographic: The 5 Pillars of Treasury Management

Capture the 5 essential elements of treasury management discussed above inside this easy-to-review infographic designed for Central Indiana businesses like yours. Request your copy here.

The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.