For a small business owner, access to capital has been the main reason to establish a strong relationship with a bank/banker – sometimes the only reason. Banks provide the lowest cost of capital available and without its availability, owners have to turn to other sources most often in the form of their own savings or personal debt or borrowing from family and friends. A last alternative may be factoring (selling invoices at a discount) or bringing in investors. Neither of these options is attractive because they are very expensive. So bank borrowed funds in the form of installment/term debt (equipment loans, vehicle loans, fixed asset purchases) or revolving credit (operating line of credit) are the lifeblood of many small businesses. And the more you grow, the more you need. It is not until sales level out or decrease that your dependence on bank debt might slow down unless you are one of the fortunate ones who are highly profitable and can retain earnings at a rate sufficient to finance your ever-growing inventory and receivables internally.
In these trying fiscal times, perhaps your sales have indeed decreased. You are probably hunkered down, trying to operate as lean and as efficiently as possible. You may even have had to lay off staff. This is the perfect time to sit down with your banker (and/or one of the bank’s solutions consultants) and see how he/she may help you, not through debt but rather through a service they provide called “cash management” or “treasury services.” What this really means is to spend time focusing on your internal operational processes. Is there a better, faster, easier and all around more efficient way to perform some of those tasks? For instance, you or one of your staff surely spends a fair amount of time posting your receipts. Depending on the time spent on this task, you may be able to outsource this function to your bank and give yourself or your staffer more time to focus on other tasks, like what you do best. Your bank can receive your payments from a p.o. box near their facility. They pick up your mail (addressed to you) and take it back to the bank for deposit preparation. Once your deposit is made, images of the checks are made available to you almost instantly via the internet. The real savings comes into play if the bank is capturing your posting information (account number, customer number, invoice number, etc.) and can provide that to you via an electronic transmission for upload into your general ledger system. Many accounting packages are able to import a csv (comma separated value) or flat file through an upload. Straight through posting saves a huge amount of time and eliminates the possibility of error from rekeying. If this arrangement interests you, talk with your banker about their lockbox service. You and your banker should be able to quantify the time and other resources you are spending on this activity and compare it to the cost of a lockbox service. This cost benefit analysis may surprise you.