Effective cash management helps businesses and nonprofits stay agile, cover expenses, and invest for the future. Sitting on extra cash isn’t a strategy, and leading organizations work with their banks’ treasury management experts to customize modern treasury management solutions, helping them allocate and optimize funds to improve efficiency, reduce risk, and create new opportunities.

Understanding types of cash

Many organizations manage three broad types of cash, each serving a distinct purpose in their financial strategy:

• Operating Cash – needs to be readily available for immediate business needs to cover day-to-day expenses like payroll, rent, and supplier payments.
• Strategic Cash – includes reserves set aside for planned future investments or expansion. These funds should earn competitive returns while remaining accessible when opportunities arise.
• Reserve Cash – a safety net for emergencies or unforeseen circumstances, ensuring financial stability during downturns or disruptions.

Seasonal businesses and nonprofits with fluctuating revenue and donations need larger reserve cash positions during peak seasons to cover expenses during slower periods, while ensuring their strategic cash remains positioned for growth.

Optimizing cash management

Holding too much cash in a low- or no-yield account sometimes misses growth opportunities. However, having too little cash available can create liquidity crises, forcing businesses to rely on costly short-term borrowing for unexpected expenses. A customized, structured cash management strategy helps to maintain the right balance.

This might include:

• Liquidity Planning – establishes clear guidelines for how much cash should be in each category. Regular reassessment based on market conditions and goals keeps the strategy current and effective.
• Cash Flow Forecasting – uses data-driven projections to anticipate cash needs, helping businesses avoid last-minute funding shortfalls that can disrupt operations or force expensive borrowing decisions.
• Strategic Yield Optimization – explores safe, short-term investment options for excess cash while ensuring accessibility when needed. This approach maximizes returns without sacrificing liquidity.
• Automated Cash Sweeps & Transfers – reduces manual oversight and optimizes cash deployment with automated solutions that move money where it’s needed most without constant monitoring.

Improving processing of receivables and payments

Modern treasury management also focuses on how businesses and nonprofits process incoming and outgoing payments.

Strategic management of both accounts receivable and accounts payable creates a more complete cash flow picture, allowing organizations to better predict when money comes in and goes out. This dual approach strengthens client and vendor relationships while improving overall financial performance.

Businesses and nonprofits that take a proactive, structured approach to liquidity can make better financial decisions, improve efficiency, and reduce financial stress.

Your strategic financial partner

First Business Bank’s experts understand that every organization’s needs are different. We work with clients to develop customized strategies that turn resources into a competitive advantage. Our comprehensive solutions help companies make every dollar work harder. When you’re ready to transform finances from a static resource into a dynamic tool for success, our team is here to help.

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(262) 792-1400
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