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December 11, 2006

COMMENTARY: Tech support | New financial tools — from electronic payment systems to online payroll — offer small businesses a competitive edge

By Robert M. Davis
Senior vice president and business banking sales leader, KeyBank, Portland

A housing market slowdown, rapidly rising energy and healthcare costs, international tensions ˆ— these and other factors are causing many companies to take a step back and put growth plans on hold. Despite recent stock market gains, a strong current of caution runs through the business community, and conditions are arguably more uncertain on Main Street than on Wall Street.

This is no time to be cautious, however. Companies that delay equipment purchases, for example, may be harming their ongoing competitiveness. Companies must continue to innovate and improve their efficiency. Those with the right products, systems and strategies can thrive, no matter the economic climate. But those that delay expansion plans may fall behind in the marketplace.

Today, there is a wealth of technology-based tools to help companies enhance competitiveness by streamlining operations and reducing costs. Take, for example, electronic payment solutions. Consumers use credit cards for approximately 25% of their spending, but some retailers are woefully behind the times when it comes to how they handle such transactions. As a result, retailers should optimize the ease, security and efficiency of credit card purchases. Effective credit card payment processing systems encourage sales and improve employee productivity.

But what's important when looking for a new payment processing system? Retailers should choose a partner or a solution that is as secure as possible. Does it back up transactions? Is the solution robust enough to minimize ˆ— or, hopefully, eliminate ˆ— downtime to streamline transactions? Does it provide automated card authentication to prevent fraud? In addition, the system should accept the widest range of consumer cards, from corporate cards to debit cards.

The ideal payment processing system will enable companies to reduce outstanding receivables, access funds faster and reduce in-house administrative costs. The best electronic payment solutions carry no annual fees or automated clearing house (ACH) fees. They should also include flexible equipment lease and purchase programs. The leading systems offer the ability to download data for analysis or integration into in-house accounting systems, on-line check transaction qualification, copy retrieval and chargeback information. They also consolidate all of a company's locations into one itemized monthly statement while retaining location detail. Customer service should be available 24/7, online or by phone, and customized, industry-specific training and features may be very helpful.

Meanwhile, small-business owners should consider workplace banking programs, which offer a win-win situation for employers and employees alike. For employers, these programs reduce payroll and administrative costs by increasing automated payroll participation. And the benefits for employees include free or discounted banking services such as interest checking, premium rates on money market accounts and CDs, preferred pricing on loans, and the ability to integrate banking and investing.

A newly emerging service that is proving highly valuable to companies is Web-based check deposit services. These systems save time and money by eliminating trips to the bank and allowing companies to make deposits ˆ— from their own offices ˆ— after normal banking hours.

Using these services, company staff can scan paper checks and transfer the digitized image of the check through a secure online connection direct to a bank. These systems also facilitate access to funds and provide real-time online access to deposit activity information.
Online payroll systems also offer benefits to small businesses. Companies can securely enter and submit payrolls online at any time, track vacation time and allow employees to access such personal financial information as W-2 and W-4 forms. Employees can administer their own direct deposit accounts, W-4 and benefits information. In addition, some payroll systems offer tax calculation and filing options, which can protect companies from late and inaccurate tax deposits.

If you think these innovative financial management strategies seem suitable only for large companies, think again. All the services and systems that banks have introduced in recent years are scalable, with enough flexibility to serve a company of almost any size.
In addition to these innovations, it's important to keep in mind that well-established online banking services offer secure, 24/7 remote banking convenience through fund transfers among accounts, real-time tracking of accounts, bill-paying and downloading of transactions directly into online account registers.

The introduction of an ever-widening array of technology-based tools marks another important step in the evolution of how small businesses use banking products and services. Such tools help transform banks into trusted advisors and resourceful service providers. Useful in times of robust economic health, they are even more valuable to small companies in times of financial uncertainty.

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