Owning or managing a business is an extreme undertaking that requires a strategic approach — and quality support from the right services. Adequate cash flow management paired with opportunities that allow your money to work for you on multiple levels can play a key role in helping your business find success. In this blog, Central Bank’s business banking experts discuss different strategies for maximizing returns on your business deposits and optimizing your company’s cash management system. Let’s get started!

Success from the Start: Selecting Your Company’s Business Banking Accounts
No two business endeavors are exactly alike, and the financial approach that works for one company may not work for others. When determining ideal financial steps forward, it’s important to factor the impact your business banking accounts can have.

With so many options out there, business leaders have the opportunity to seek out checking, savings and related accounts tailored to their unique circumstances and goals. Here are some things to consider:

• Interest Rates: When comparing business accounts, check to see if your potential options accrue interest. If they do, evaluate the annual percentage yield (APY), a rate banks are required to display on their accounts. The APY refers to the earned interest rate from an account in one year, and how often the interest is compounded. A higher APY indicates a higher return on your business deposits, helping your earnings grow at a faster rate.

• Service Fees: Service fees help support the tools, services and products upon which banking customers rely. Hidden fees incorporated into a business banking account, however, can eat away at earnings without the account owner even realizing it. Ask how potential charges come into play with your accounts. A few common varieties include:

  • Monthly Maintenance Fees: Fees charged for managing and protecting funds, and supplying customers with products and services

  • Minimum Balance Fees: Amounts charged when account balances drop below predetermined minimum requirements

  • Wire Transfer Fees: Charges for wire transfers made to and from an account

  • ATM Fees and Surcharges: Charges for using a bank card at an ATM owned or operated by a financial institution other than the one that issued the card

  • Overdraft Fees: Charges for spending more money than is available within an account

• Branch Banking and ATM Options: While online banking is a convenient and cost-effective approach, your business may require daily cash or check deposits, as well as ATM access. In such instances, you’ll want to make sure you have easy access to a physical branch or ATM.
  Did You Know? With a Central Bank business or personal checking account, you can use any domestic ATM without incurring fees. We offer automatic refunds.

• Transaction Limits: Check with your potential bank to determine whether accounts are subject to limits on deposits, withdrawals, bill payments or other electronic transactions. Some financial institutions set limits on monthly check writing, transfer amounts and the number of overall account transactions, as well.

Services that Contribute to Significant Business Returns
Strategic use of your local bank’s programs and services is a great way to maximize your company’s profits, make significant returns on your investments and fuel long-term success. Here are a few such services to consider:

• Factoring: Factoring involves selling reliable accounts receivable to a factoring company that pays you a percentage of what is owed by your customers. You receive the remainder of what’s owed, minus an agreed-upon discount, once your customer completes payment with the factoring company. Factoring offers improved cash flow, freeing up finances a business might otherwise find itself waiting on. It’s a popular option among medical and veterinary offices, and those where customer payment is often slow to come.
  Did You Know? Central Bank offers factoring services through affiliate company Advantage Business Capital.

• Insured Deposit Accounts: With headlines in recent years highlighting the threat of bank failures, many business owners and managers find themselves wondering whether their funds are safe. Doing business with a financial institution such as Central Bank, which has Federal Deposit Insurance Corporation (FDIC) protection in place, is a great way to ensure peace of mind.
  
  The FDIC insures the funds in each ownership account up to $250,000 — and since its inception in 1933, no depositor has ever lost FDIC-insured funds. But what happens if you want to insure amounts beyond that $250,000 limit? There are options for companies with larger financial holdings:

• Insured Cash Sweep Accounts (ICS): An Insured Cash Sweep account allows businesses to deposit large amounts of money into several banks to ensure deposit protection. ICS accounts are managed through one bank that gives you a consolidated statement to track your funds — and these accounts earn significant interest compared to regular savings accounts.

• Certificate of Deposit Account Registry Service (CDARS): Similar to ICS accounts, CDARS provides businesses with access to several certificates of deposit (CDs) across FDIC-insured banks. CD accounts come with a fixed interest rate, fixed term length and a fixed withdrawal rate. Compared to ICS offerings, CDs lock your funds into the account. While these accounts don’t have monthly fees, they can have early withdrawal penalties or one-time deposit limits. If your business doesn’t need access to your funds, this account may work for you. Term lengths are often flexible, ranging from a few months to a few years.
  Interested in learning more about Central Bank CDARS and ICS services? Our online information sheet covers what you should know.

Other Investment Opportunities
Many businesses look to invest their money in hopes of generating more revenue and growing their assets. Remember, all investments carry some degree of risk. To balance those risks and maximize returns, it’s often advisable to have a mixture of short-term and long-term investments — but every company’s needs are different. We recommend talking with a trusted financial advisor when determining your ideal investment path. Here, we’ll take a high-level look at some of your options.

• Short-Term Investments: Short-term investments are considered low risk because deposits have a shorter maturity date (typically less than a year) and are less likely to be exposed to market fluctuations. Often featuring fixed interest rates during their entire term, this investment option creates a more stable and consistent return. Some provide an extra layer of security with backing from the government. Examples of short-term investments include certificates of deposits and treasury bills.

• Long-Term Investments: If you can go without accessing your cash for an extended period, a long-term investment plan can be a quality option. Ultimately, these investments offer higher returns on deposits but come with greater risks due to high volatility. While short-term investments offer low volatility, the expected returns are much lower. Examples of long-term investments include mutual funds, exchange-traded funds (ETFs) and stocks.

Potential Risks Involved with Investments
As we’ve mentioned, investments carry their share of risks. Before choosing a particular path, it’s important to weigh one’s options and determine whether the company could afford a financial loss in the event that an investment were to be less lucrative than intended. Here, we’ll look at some of the more common risks associated with short- and long-term investments.

• Market Risk: Unpredictable market conditions can cause the value of an investment to rise or fall.

• Business Risk: The value of your investments can change as your company’s financial needs change.

• Currency Risk: International investments face the risk of fluctuations related to economic climates, political upheaval and related events in a country or region.

• Liquidity Risk: Access to funds will vary depending on the type of investment a company pursues. This can present issues when a business needs to tap into its financial resources but can’t due to an agreements terms and conditions.

• Concentration Risk: Putting all of a company’s finances into a single stock or investment can increase the potential of losing funds. As with so many business considerations, diversification can offer protection in the investment world.

Treasury Management Tools for Optimizing Business Cash Flow
Looking beyond business banking tools such as checking accounts, savings and loans, and tapping into your local bank’s more specialized services, can help your business better manage cash flow and streamline operations. Treasury management services are a great example.

Treasury management systems can turn idle cash into a valuable resource and ensure the availability of needed funds. These tools can also heighten liquidity and help ward off financial risks. Central Bank offers a number of treasury management solutions designed to mitigate risks, improve efficiency and make cash management more manageable.

• Commercial Connect: An online banking platform providing secure access to critical transactions such as ACH debit or credit transfers, tax payments, domestic or international wires and more. It makes quick work of the financial tasks that drive everyday business.

• Business Credit Cards: Central Bank Visa® Business Credit Cards allow for secure, streamlined spending and are accepted by companies around the globe. Online card management and consolidated statements make it easy to know how much money your company has and where it’s being spent. Meanwhile, employee card options allow companies to carry out business as usual without holdups related to spending authorizations.

• Same Day ACH/ACH Origination Services: A secure system that allows a business to initiate, process and clear transactions securely and easily within a few hours. Transaction examples include, but are not limited to, payroll check direct deposits, payment preauthorization and tax payments.

• Positive Pay Fraud Detection: This system lowers a company’s fraud risk by requiring authentication for ACH transactions presented against its business checking account. Items that do not match a list of approved merchants are flagged for review by authorization team members — then waved through or halted, based on findings.

• DLM Remote Deposit: This feature saves a trip to the bank and allows you to quickly scan checks from your office to deposit funds electronically into your account.

• Wire Origination: Wire origination services facilitate transactions around the globe, allowing companies to safely transfer domestic and international funds between their own accounts and those of third parties.

Positioning a company’s financial approach for long-term success can be intimidating, but a bit of forethought paired with the right tools eases the process. If you have questions about any of the above, or if you’re interested in learning how Central Bank can help your company make the most of your business deposits, reach out to our business banking pros today. We’re here to help, and we’d love to hear from you.