Tech Talk: A New Corporate Consciousness

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Small businesses wake up to treasury management

By Jennifer J. Salopek

A robust portfolio of treasury management services, including but not restricted to cash management software systems, is increasingly a key competitive advantage for community banks seeking to attract and retain commercial clients. More small businesses recently have been recognizing the efficiencies of these programs and the potential for growth.

“There is increasing awareness among banks that treasury management is a fee-income-generating product,” says John Byl, senior vice president and treasury sales manager at Mercantile Bank of Michigan in Grand Rapids, Mich. “Formerly reserved for larger customers, banks are making these services available to smaller customers.”

Points out Enrico Camerinelli, senior analyst in the wholesale banking practice at Aite Group, the Boston technology consulting firm, “The role of the business treasurer is evolving from basic operational activities to accountability for strategy, working capital and risk management, and this is happening faster in small companies.

“While a large corporation might want to own its own system, the needs of small companies can be well met through community banks.”

There are compelling reasons for community banks to develop well-rounded treasury management programs, adds Paul Simoff, principal with Austin Associates LLC, a consulting firm in Toledo, Ohio. “To remain competitive and retain the clients they already have, community banks need to develop a wider range of fee-based services,” he says. “Being the lender of choice is no longer enough.”

A full range of treasury management services can position community banks as key business partners to their commercial clients, Byl and Simoff agree. A full portfolio of services—as opposed to more limited cash management—comprises a range of corporate payment and transaction services.

Anticipating new awareness

Mercantile Bank always had a strong focus on business customers, but several years ago the bank sought to acquire greater understanding of and expertise in treasury management products. Byl was brought on board 10 years ago to create a purpose-built portfolio of treasury services based on what the bank’s business customers wanted.

Once considered a specialty service, treasury management services have become more essential for small businesses. Byl and Simoff agree that a complete treasury program covers a considerable list of technology-based services under the following four major areas of collections, disbursements, cash flow management and information reporting:

  • Collections—remote deposit capture, merchant services, ACH, Lockbox, online bill pay and customer payments portal.
  • Disbursements—ACH, business checking, business credit cards and wire origination.
  • Cash flow management—loan sweep and commercial investment checking.
  • Information reporting—balance reporting, stop payments, book transfers, account reconciliation, electronic statements and check images, and transaction history.

“All of these services are essential to be competitive,” says Byl, who does a lot of customer research before rolling out new products.

A new comfort level

Increased comfort with technology, coupled with an enhanced need for fraud protection, has driven more small businesses in recent years to adopt treasury services, Byl says. Technological advances have also made it easier and less expensive for community banks to offer these services.

“Automated clearinghouse services historically have required special software,” Byl points out. “It’s much easier to offer now that we have Web-based interfaces and templates. Our customers can upload files to the bank easily and securely.”

“There is increasing awareness among banks that treasury management is a fee-income–generating product.”
—John Byl, Mercantile Bank of Michigan

Technology also facilitates one of Mercantile Bank’s newer commercial transaction offerings: remote deposit capture. Using a multifeed scanner, a flatbed scanner or a smartphone, the bank’s business customers can scan and deposit checks online. Increasingly, small businesses understand how this powerful combination of systems and machines, by speeding their collections and minimizing their deposit preparation time, can generate major operational efficiencies and cost savings.

Rare is the commercial enterprise these days that doesn’t conduct some business across international borders. This trend toward globalization means that customers may need to initiate domestic and international wire transfers in U.S. or foreign currency, with real-time exchange rate information. These services also are important in attracting small-business customers, Byl says.

Treasury management services offer a competitive advantage, not only to community banks, but to the small-business customers they serve. Mike Ottenwess, controller for folding carton manufacturer Wynalda Packaging, has been a Mercantile Bank client for a decade. Increasing financial systems sophistication is something his company’s own clients look for, Ottenwess says.

“We are changing with the times in how we pay vendors and manage deposit accounts,” he adds. “As an international business, we have many customers who require electronic data interchange, international letters of credit and so forth.”

Wynalda Packaging also uses Mercantile Bank’s payroll processing service, a less common payment offering among community banks. The service was developed in response to customer requests, Byl says. “Our customers trust us and were looking for recommendations for payroll processing. We developed our own product set.”

The appeal of a community bank like Mercantile Bank with a complete treasury management program, and all of the technology systems that involves, is clear to Ottenwess. “We were with a large national bank before; we had to fit into their [product] scheme. Mercantile is much more flexible.”

Forging close commercial relationships through treasury management services and systems, like the one developed between Mercantile Bank and Wynalda Package, should be a strong focus for community banks, Camerinelli says. However, a full suite of products is essential to achieve that goal, he advises, which includes robust financial reporting and analytics.

“Clients need systems that allow them to move beyond their daily operational duties to understanding payment behaviors,” he says. “Customers are seeking efficiency and good value.”


Jennifer J. Salopek is a writer in Virginia.