Importance of cash flows
		Cash flow statement
		Cash management options
		Electronic services
		Merchant services
		Payment with credit cards
		Managing receivables
		Managing inventory
		Using trade financing

Banks and other financial institutions are eager to provide your business with a range of cash-management services that offer convenience and opportunities to better manage your cash flow.

In fact, most banks have business-banking centers that focus on lending and relationship building with small and midsize businesses. Some of the cash-management options these service centers offer include:

• Lines of credit. A line of credit is a backup in case the cash flows from your business fall a little short. A credit line can be either secured or unsecured. A secured credit line requires you to pledge your business or personal assets as collateral. Interest rates on lines of credit are usually priced at the prime rate plus a margin of two to three percentage points.
  
  
• Overdraft and check-guaranty. Occasionally, you may write a check whose funds are to be covered by a deposit you expect from a customer. In case the deposit doesn't arrive in time, you can avoid bouncing a check with overdraft or check-guaranty protection. These services aren't usually free, but they do provide a stopgap source of borrowed funds.
  
  
• Lock-box services. A lock-box is a secure means of receiving deposits throughout the day and having your account credited for the funds, generally on the same day. To some extent, electronic banking has replaced the need for a lock-box. However, many people bank the old-fashioned way, and stick to writing a check. To accommodate these customers without slowing the flow of funds to your account, a lock-box may make sense.
  
  
• Electronic bill payment and presentation. Electronic bill payment and presentation (EBPP) lets you pay customers and send invoices electronically. EBPP is a two-edged sword since it cuts down on the opportunity to "play the float." (Float is the number of days it takes a payment to complete processing. Until that time, the paying party continues to earn interest income on the funds.) EBPP speeds up both payments from your customers and to your vendors. You need to weigh the trade-off in playing the float.
  
  
• Sweep accounts. At the end of the day, you want to put your excess cash to work earning interest. By using a sweep account, your funds earn interest overnight. Since most business checking accounts pay little or no interest, you want to take advantage of sweep accounts whenever possible.
  
  
• Merchant services. Banks will help you to set up an electronic payment system to help increase your sales by accepting credit and debit cards. Payments clear through the federally supported Automated Clearing House (ACH) system, which eliminates payment risk to you.
  
  
• Payroll services. Small businesses increasingly hire specialist firms to handle their payroll-processing operations. By outsourcing, small businesses can cut down on their fixed expenses.
  
  
• Tax-payment services. The Internal Revenue Service requires many businesses to make estimated payments for income taxes every three months. Banks offer an electronic platform for making such payments. (Note: The IRS launched Electronic Federal Tax Payment System (EFTPS OnLine) in the third quarter of 2001. EFTPS OnLine is a Web-based electronic-payment system aimed at improving the process of making estimated quarterly tax payments.)
  
  
• SBA loans. The U.S. Small Business Administration (SBA) is a federally chartered organization that provides financial and other forms of assistance to more than one million small businesses. The SBA relies on a network of certified and preferred lenders and provides loan guarantees. You should check with your lender to see if it participates in SBA loan programs.
  
  
• Online banking. You are likely to want the same features in an online bank account for your business that you receive for a personal account. At a minimum, these features include moving money between accounts (including other financial institutions) with electronic funds transfer (EFT) services. Other basic features include the ability to view transaction history and monitor the account to see when deposits and payments clear.
  
  

Next Topic: Electronic services