Understanding Cash Management Accounts

Cash management accounts are commonly offered to large businesses. These accounts aim to provide a suite of services for a business to make their banking experience more beneficial. In some cases, these accounts are also offered to individuals or small businesses. Here are the basics of cash management accounts and what they have to offer.

Sweep Account

One of the most prominent features of a cash management account is that it sweeps your money into a special interest-bearing account. Generally, overnight, your money is transferred into a money market mutual fund or a money market account. Then, that money can earn interest without actually being invested in another investment full time. In some cases, this account will take only money that is in your account above a certain amount. This keeps a minimum amount of money in your account at all times.

Positive Pay

Another nice feature that comes with many cash management accounts is positive pay. Positive pay is a feature that ensures that a check was written by the company before it is processed by the bank. With this system, the business inputs the checks that they have written into an electronic system. Then, the bank checks the check number on the register before processing the payment. This has the ability to significantly reduce the amount of check fraud that could take place with a business.

Controlled Disbursement

Controlled disbursement, a feature that comes with many cash management accounts, will enable business owners to know exactly what is about to come out of their accounts. With this feature, they will receive a report at the beginning of the business day that will outline the transactions that will take place in their accounts. In this way, the business owner will be aware of what transactions are coming up and can make the necessary adjustments in order to avoid any insufficient funds fees. 

Lockbox

One type of cash management account that certain businesses can set up is a lockbox account. With this type of account, they can set up a P.O. box where they receive checks. The bank can be authorized to open their mail and immediately deposit the checks that are received. This has the ability to significantly increase cash flow for the business.

ACH 

Many businesses also use ACH (automated clearinghouse) cash management accounts. This is the method that banks use in order to transfer money from one bank account to another. This is very common in businesses. It is generally how they will make business-to-business payments. This is also what businesses use in order to make automatic deposits into employees' accounts. In some cases, businesses will also use this system in order to receive payments. If they have automatic payment plans set up with customers, this is how the payments are processed. This system makes things much easier, as the money is automatically taken out of or put into their bank accounts.


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