The Bottom Line - Banking On Cash Flow
Banking On Cash Flow
Payments, deposits, and cash flow are the lifeblood of any business. Do yours need a checkup?
While generating revenue is certainly a crucial component of any business, being able to collect that revenue in a timely, efficient, and secure manner is equally important to successful operations and sustainable profitability.
The fact is a business simply cannot survive without reliable receivables and solid systems to receive payments on those receivables. Which is why smart, effective treasury management is essential for businesses of all sizes and industries.
It’s also why we created the Cash Management Checkup. The Checkup is a complimentary in-depth look at your current receivables, payables, and cash management processes designed to give you a quick assessment of your strengths, weaknesses and opportunities. The result is a comprehensive set of findings and recommendations aimed at optimizing cash flow, managing liquidity, mitigating risks and maximizing returns on investments.
The Cash Management Checkup covers the following key areas of your treasury functions:
Cash Flow: Managing cash inflows and outflows efficiently is crucial for maintaining liquidity and supporting day-to-day operations. We look at cash flow patterns and forecasting, as well as your depository operations and payments.
Working Capital Optimization: Optimizing working capital ensures sufficient liquidity to meet short-term obligations. This includes optimizing accounts receivable and payable processes, and minimizing excess cash holdings.
Risk Management: Identifying, assessing, and mitigating various financial and operational risks includes implementing robust internal controls to protect financial stability and guard against theft or fraud.
Cash Investment and Liquidity: Surplus cash should be invested wisely to generate returns while maintaining adequate liquidity. Cash pooling and sweep accounts help you optimize your cash positions and maximize returns.
Technology and Automation: Advancements in technology have revolutionized treasury management practices, enabling you to automate routine tasks, enhance cash visibility, and strengthen security controls.
Regulatory Compliance: We also look at all relevant reporting standards, tax laws, and banking regulations. Staying up to date is essential for safeguarding business interests and maintaining compliance.
Looking for a third-party perspective on your treasury functions? Our Treasury Management team is ready to help. We’re accessible, easy to work with and always focused on your best interests.
We look forward to talking about the lifeblood of your business — your cash flow — and all the latest ways you can collect it, protect it, save it — and use it.
Watch Stephanie share her thoughts on treasury management at Country Club Bank:
— Stephanie Mallory, CTP, Senior Vice President, Treasury Services, Country Club Bank — Member FDIC
The economy finished strong in 2023. What about 2024?
At this time last year, the economic outlook was concerning. Inflation was too high, interest rates were rising, and the predictions of a coming recession were prevalent.
Instead, the U.S. economy proved its resilience once again by growing 3.1% over the past year. The numbers illustrate this generally positive tale: overall inflation dropped from 6.4% to 3.4%, with all important core indicators, moving from 5.6% to 3.9%.
Unemployment also remained in unusually low territory, hovering between 3.4% and 3.8% throughout the year.
Markets also breathed a collective sigh of relief, with the S&P 500 rallying by 26.3%, and the average PE (price to earnings) ratio rising to 19.5 compared to the previous year’s 16.7, and the 30-year average of 16.6.
And while the Federal Funds rate did move from 4.1% to 5.3% by year-end, borrowers were also able to breathe easier with the pause in rate hikes and the welcome forecasts of coming rate cuts.
Is the so-called soft landing working and will it continue in 2024?
All signs point to continued positive momentum in consumer spending, job growth, and the latest inflation numbers.
Inflation remained mostly subdued in December, rising only 0.2% in December from the previous month. That was up from a 0.1% decline in November but still consistent with Fed targets.
Fed officials are on track to hold rates steady for the foreseeable future and have even penciled in three rate cuts for 2024 with the caveat they must be timed to deliver price stability without jeopardizing job market gains.
Bottom Line: Yes, there are signs of stress with recent news of increased layoffs and a lower GDP growth projection of 1.4% this year.
But inflation seems to be firmly under control now. At a monthly annualized rate, core prices have been running at a rate equal to or below the Fed’s 2% target.
Help also appears to be on the way in the form of rate cuts – estimated to begin in May – that should support personal spending, business investments and job growth creation. Falling rates may also continue to stimulate housing activity as long as consumers can be assured of a steady supply of affordable loans and a way to repay them.
The Feds attentive monetary policy has worked, now the challenge turns to remaining vigilant and nimble – and open to adjustments – on the final approach to the soft landing.
— Marcus Scott, CFA, CFP®, Chief Investment Officer (CIO) for Country Club Trust Company
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.
The opinions and views expressed herein are those of the author and do not necessarily reflect those of Country Club Trust Company, a division of Country Club Bank, or any affiliate thereof. Information provided is for illustrative and discussion purposes only; should not be considered a recommendation; and is subject to change. Some information provided above may be obtained from outside sources believed to be reliable, but no representation is made as to its accuracy or completeness. Please note that investments involve risk, and that past performance does not guarantee future results.
Treasury Management Tips
Four essential best practices of treasury management
Whether you're a startup or a large corporation, you need to quickly, cost-effectively, and safely receive payments to fund the people, products, and profits that fuel your business.
We recently sat down with Kaitlin Guthrie, VP and Treasury Management Officer at Country Club Bank, to talk about the best practices of sound treasury operations and management. Guthrie works with companies across the metro area and says there are four essentials that every business can implement — no matter the size or industry — to streamline and secure payments and deposits. Here they are:
- Map and Forecast Cash Flow. Accurate cash flow forecasting is the cornerstone of effective treasury management. Use historical data, sales projections and cost calculations to develop reliable cash flow forecasts. Look at payment types, posting speeds and any friction spots that might be delaying timely payments.
- Automate To Accelerate. Automate as much as possible in your accounts receivable and accounts payable processes to accelerate deposits and improve your protection against theft and fraud.
- Diversify with Dedicated Accounts. Every business needs four separate bank accounts for security, efficiency, and redundancy: Operating; Accounts Payable; Accounts Receivable; and Payroll. Dedicated accounts provide an extra measure of structure and safety.
- Step Up Security. Theft and fraud scams are at record levels. Take advantage of the latest ACH and paper check security measures. Audit your cash controls and access points. Reconcile all transactions against POs, invoices and bank statements. Regularly update vendors lists, payees and account user access.
Take steps today to improve your organization's financial stability and resilience by implementing industry best practices. Make sure you’re prepared to withstand ongoing threats, as well as take advantage of new growth opportunities. If you’d like to talk more about your cash management needs, you can reach Kaitlin Guthrie at 816.931.4060, or get in touch with us here.
Treasury Management Solutions
Cash control: Comprehensive treasury solutions that give you productivity and peace of mind
Simplifying and securing your receivables, deposits, and outgoing payments requires careful planning and thoughtful solutions that fit your business today — and tomorrow.
At Country Club Bank, we’ve got you covered, from simple process improvements to powerful automated solutions that streamline your information and control functions, facilitate receivables and process payables.
To find out more about our entire line of Treasury Management solutions, give us a call at 816.931.4060, or get in touch here.