UMB Bank
Michael Garner
As economic challenges persist, maximizing liquidity to meet growth goals might feel as complex as the shifting and uncertain market conditions. However, using a multi-pronged approach to your business finances can help create efficiencies and streamline operations.
Leveraging excess cash
One of the best ways to maximize liquidity is to put your cash to work, and there are many options to optimize cash flow. This could be through money market sweeps or high-yield money market accounts, interest-bearing savings, investments, and loan sweeps. Loan, or credit, sweeps help pay down debt that is more expensive than interest-bearing accounts, and allows credit lines to infuse your deposit accounts as a safety net.
Integrating and optimizing your credit card program
Business credit cards are an integral part of business finances, as they can create efficiencies while freeing up cash and managing expenses. Integrating them into your cash management strategy can help by:
- Increasing flexibility through the float period between credit card purchase and payment
- Improving spending power with higher limits
- Using cash rebates to reinvest into the business or to fund expenses
Also integral to efficiency are payment solutions. Two that can have an impact on your bottom line are Visa® Payables Automation (VPA) virtual cards and integrated payables. VPA cards offer a simple, secure way to pay suppliers, which means more secure transactions and reduced processing costs for paper checks — ultimately resulting in more working capital. For further efficiency, we have also seen clients that have maximized vendors on the card program transition from VPA to a fully integrated payables program, which encompasses both card and electronic payments. Automating and incorporating all payment types, including virtual card, into one payment solution not only streamlines the entire AP process, but it also improves security and business continuity.
Consider several lending options
Sometimes, there is not enough cash on hand to readily cover large expenses or new business opportunities. That’s when evaluating lending options as part of your liquidity strategy comes into play. With interest rates being impossible to predict, it can be difficult to choose the right loan option, so model how each will impact your short- and long-term goals. Options our clients have had success with include term loans, working capital lines of credit, and swaps, which can be lucrative if companies want to lock in interest savings based on the yield curve.
Don’t lean on just one financial lever
Using a multi-layered approach that combines cash strategies, credit card benefits, and smart lending offers flexibility to meet business goals while also spurring growth. By leveraging “new” cash created by using business card rebates and expense efficiencies, owners can redirect funds back into the company by investing in upgrades, hiring, or expanding, etc.
In market environments like today where cash on hand is critical, employing one of many lending options is another way to protect your liquidity, while having the necessary capital to meet business goals — underscoring the importance of an approach that includes complementary strategies.
Michael Garner is president of UMB Bank’s Texas Region. Since 1913, UMB has remained focused on cultivating relationships based on integrity and quality and helping clients achieve their goals. For more than 110 years, we've operated with high-touch service, prudent business practices, and a stable balance sheet that allow us to weather all economic cycles and continue to serve our clients.