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Cash Management Questions That Will Help You Save Time and Boost Profits

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As the owner of a small business, you probably know that effective cash management is critical. Ask yourself the following questions. Each time you answer “yes,” you’ve found an area where you’re spending too much time and money.*

Do you call or visit your bank to transfer funds back and forth between your money market and business checking accounts? You can eliminate this task by opening a single cash-management account that combines checking, brokerage, and lending services. At the end of each business day, the available cash in your company’s checking account will automatically be “swept” into your money market funds. In addition to saving time and effort, you will be investing your working capital more quickly–and that can help increase your returns. What’s more, you’ll avoid the overdraft charges that result when manual transfers are either miscalculated or delayed.

Do you call or visit your bank to access your commercial line of credit or to make loan payments? If you qualify for an integrated line of credit, this task too can be eliminated. In general, your line of credit will automatically be accessed whenever the cash in your money market account is depleted. This helps avoid overdraft charges and, because any excess cash in your account will automatically be used to reduce your credit balance, helps minimize your interest expenses.

Do you review all your company’s business charge-card expenses in an attempt to keep them to a minimum? Tracking your company’s purchases becomes much easier if you choose abusiness charge-card account that provides a separate number for each employee who is issued a card. Some cards even feature individual authorization limits that allow you to decide how much purchasing power each employee will receive. Other possible benefits include delayed debits, which allow funds for purchases to remain invested longer, and rewards programs that offer free travel and complimentary business items.

At the end of each year, do you comb through your expense records looking for tax deductions? Some cash management accounts let you code your checks as they are written, and categorize the expenses in your monthly and annual account statements. These features can help you spot every deduction you’re entitled to take.

Do you try to calculate all activity since your last monthly statement to see if you have sufficient funds to take advantage of an upcoming business opportunity? A cash management account with 24-hour Internet access can provide you with complete account information at any time from your personal computer, which can help you take more timely advantage of opportunities.

Do you manually process customer payments and prepare deposit slips before hand-delivering them to your bank? A lockbox service can perform these services for you and accelerate the collection of your receivables. After receiving your customers’ payments in the mail, the financial institution providing your lockbox service will clear the checks, enter the deposits into your account, and prepare a detailed statement. Using a lockbox service can cut days off the time needed to turn your receivables into cash.

Do you mail or deliver charge and debit card sales records to your bank? Electronic card-processing services can eliminate this chore and take over your daily and monthly record-keeping tasks. Your accounts will be reconciled daily, and the information will be transmitted to your financial institution through a point-of-sale terminal. Monthly summary statements are also generally provided. Moreover, card payments can automatically be credited to your account and swept into your money market funds to begin earning interest as soon as possible.

Do you prepare your own payroll? This tedious and time-consuming task can’t be avoided, but it can be handled by outside professionals. Even small companies can save money by outsourcing their payroll processing. In most cases, a professional payroll processor will calculate your payroll each pay period; prepare employee earnings statements; provide direct deposit arrangements; determine and deposit federal, state, and all other withholding taxes; and file quarterly and year-end tax returns for your business. All these can save your company time and help avoid payroll mistakes and late or inaccurate tax filings.

[footnote, but no smaller type size than author bio]* This article does not constitute tax or legal advice. Consult your tax or legal advisor before making any tax-related or legally related investment decisions.

Thomas Vilord is a financial advisor/retirement planning specialist at Morgan Stanley. A PMA member, he is also the author of1001 Motivational Quotes for Success. For more information, call 800/676-2201, ext. 5847, or 856/489-5847, or e-mail thomas.vilord@morganstanley.com.



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