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Cash Management Services

This post discusses an assortment of banking services that fall into a category loosely labeled “Cash Management”. These services are lessor known banking services that make it easier to make and receive payments.

Merchant terminals that take debit and credit cards are a must for many businesses. These terminals must be qualified for, much like a loan. The potential for fraud with a merchant terminal is very high so banks are very careful about who gets them. There are monthly fees of approximately $35 and transaction fees of $0.15 per debit transaction and 5% of each credit card transaction. These fees vary widely depending on transaction volumes and the type of equipment needed. Membership in certain trade organizations can lower the fees as some of these organizations negotiate group discounts.

Two types of credit cards are available for your business. The first type is very similar to a personal card but it is in the company’s name. You have to guarantee this card personally and it will show up on your personal credit report. Interest rates and annual fees are comparable to a premium personal card but loyalty programs such as Airmiles use a lower conversion rate. The approval process goes through the credit card company and your local bank doesn’t have much input.

A purchasing card is available for larger companies. A global limit for all cards is approved by the bank, much like a loan facility. The business can decide which employees get which limits. This card type allows an employee to hold a card without being personally liable for paying off the balance. This facility will have an application and annual fee. The interest rate might be slightly lower than the other card type but the balance must be paid off each month.

Many banks offer payroll services through a subsidiary. These services take care calculating deductions and submitting them to the government. The will pay your employees via electronic funds transfer (EFT). There is generally a flat fee for each payroll and a fee for every individual employee. This service can be valuable in that it cuts down on the administration of doing payroll and writing cheques. Operating account transactions are reduced because the service will use one transaction to take the funds for payroll which saves the transactions related to writing cheques to 10 employees, for example. It is also a benefit for employees as they don’t have to take time to deposit a cheque and they don’t have to worry about holds as all funds are deposited clear into the employee’s account.

Most financial institutions offer some sort of business banking website. The features on these websites vary widely but they are free. Many banks charge a premium for access to more advanced website features. It is possible to use these sites to submit payroll deductions and pay employees directly. This is a less convenient method than using a payroll service but it may be more economical.

These cash management services can vary widely in features and cost between the banks. It’s important to weigh these considerations against the convenience of having all of your services where your business accounts are located.