How To Choose the Right Cash Management Solution

Corporate cash managers face the difficult balancing act of chasing higher returns to combat inflation and seeking safety in uncertain markets. Third-party cash management solutions can help optimize returns or provide access to safety for funds, but finding the right solution requires an evaluation of the company itself as well as their services. By focusing on the following key areas, corporate cash managers can find a trustworthy and effective partner that helps them achieve their performance targets.

Evaluating A Cash Management Company

A strong partnership begins with a foundation of trust, especially in the financial sector where improper management can lead to regulatory and reputational risk. A cash management firm’s stability, integrity, and operational excellence are essential to establishing this foundation.

Reputation and Experience

A company’s reputation is a powerful indicator of its reliability. Seek client testimonials, case studies, and references from other organizations to gauge past performance. A solid reputation is earned through ethical practices and effective service – so pay close attention to these factors.

Along with a strong reputation, a cash management partner should have experience in a variety of economic cycles and a long history of navigating changing markets. This experience is vital to building flexible processes that deliver consistent results.

Regulatory Oversight and Compliance

Financial services are highly regulated, and there are very good reasons for the oversight. A cash management partner should clearly articulate how they comply with government regulations and how their processes are designed to promote transparency and accountability.

Registration with a major regulatory body, such as the Securities and Exchange Commission [SEC], demonstrates a commitment to a high standard of conduct and a willingness to be held accountable. When a company is registered as a Registered Municipal Advisor, for example, it signifies that they operate under the scrutiny of the Municipal Securities Rulemaking Board. This type of oversight provides an extra layer of assurance that the company adheres to strict rules regarding professional conduct.

Security and Audits

In today’s digital world, data breaches are all too common. A financial partner should demonstrate an unwavering commitment to protecting their clients’ sensitive data and preventing them from being just another negative headline.

One of the most widely trusted methods for evaluating a company’s security and privacy practices is a Service Organization Control [SOC] 2 audit. The completion of this independent evaluation indicates that the company has implemented robust controls to protect client data.

Evaluating Cash Management Solutions

A company’s specific needs for their cash management strategy will typically narrow the list of potential partners to a handful.  Once potential partners have been identified, they can be further evaluated based on the following concerns.

Safety of Funds

The primary goal of most cash management plans is to preserve capital. A key factor in achieving this goal is government insurance from the FDIC or NCUA. These agencies cover up to $250,000 per ownership category at each insured financial institution.

Corporate cash reserves often exceed this limit significantly, so the most capable partners will provide access to extended coverage. The difference between these providers often lies in the amount of cash they can cover and what other options they offer to protect cash.

Accessibility of Cash

Liquidity is vital to business operations – particularly in troubled economic times. For this reason, cash managers should evaluate how readily they can access their funds with each potential cash management partner.

The process starts with understanding how each cash management partner invests cash. For example, money market accounts are highly liquid but generally have smaller returns compared to a less liquid investment, like a CD. The most capable providers can develop a cash management strategy that combines different investments to achieve necessary liquidity while optimizing returns.

In addition to the type of account, a cash management company’s technology can influence the accessibility of funds. In an ideal situation, a partner will offer an intuitive online platform that makes withdrawals simple as well as the ability to pay bills directly from the investment account.

Optimized Returns

The final piece of the puzzle is the rate of return a business can earn for their cash reserves. These rates can vary widely between financial institutions, so it is important to seek a deposit management partner with a wide network of banks and credit unions competing for deposits.

A broad range of financial institutions allows a cash manager to access returns from across the country without the stress and expense of manually monitoring rates and moving cash. The wider the range of institutions at a partner’s disposal, the more opportunity there is to achieve above-average returns.

The Choice is Simple: Deposit Management From ADM

At American Deposit Management, we have been a trusted cash management partner to businesses for over 15 years, providing modern cash solutions that simplify cumbersome processes. We’ve built our company on a foundation of trust, security, and innovation – and our reputation reflects that.

In addition to a stellar reputation, we are registered with the Securities and Exchange Commission as a Registered Municipal Advisor and subject to oversight from the Municipal Securities Rulemaking Board. We have also completed a SOC 2® audit to showcase our robust controls and data security procedures.

Our solutions are powered by patent-pending technology and a nationwide network of financial institution partners. The result is access to unlimited deposit insurance and nationally competitive rates of return – all with a single account, an intuitive online portal, and one consolidated monthly statement.

To learn more about how our solutions can simplify cash management, contact us today.