3 Cash Management Lessons SMBs Can Learn From Fortune 100 Companies

In early March, the national banking system was shaken by the collapse of San Francisco’s Silicon Valley Bank (SVB
VB
), known for its focus on technology startups, along with the fall of New York-based Signature Bank and California-based Silvergate Capital
SI
.

While the SVB failure indeed impacted a number of technology and venture capital-backed companies, with investors losing $72 billion in market capitalization, there was also a diverse range of small- and medium-sized businesses that were greatly impacted by the economic disaster.

According to NPR, over 800 startup business leaders and entrepreneurs have been working tirelessly to recover from the largest U.S. financial collapse since 2008, addressing the need to make payroll and support daily operations. With the aim to hopefully prevent layoffs and keep businesses running, SMB leaders must look to larger companies that have proven their ability to stay afloat in such economically turbulent times.

Beyond searching for business loans and other financial support with rising interest rates, smaller businesses can look to Fortune 100 companies on how to execute fiscal responsibility activities that support long-term financial management. Here we highlight three cash management lessons SMBs can learn from Fortune 100 companies, particularly related to risk management, leveraging third parties registered with the Securities and Exchange Commission (SEC), and diversification.

Execute a Risk Management Strategy

As reported by Fortune just three days after the SVB collapse, one of the major oversights that led to the institution’s downfall was the absence of a chief risk officer for the previous eight months, resulting in a risk management nightmare and $1.8 billion lost for the quarter.

In addition to customers losing trust in the SVB Financial Group
SIVB
, SVB’s parent company, the multitudinous risk resulted in clients looking to transfer major balances to other FDIC-insured financial institutions and venture-capital investors pulling startup funding.

However, Fortune 100 companies that learned from the previous recession had since implemented major changes to their risk management functions that included making enterprise compliance and risk management groups a central piece of their corporate governance structure.

By devising more effective systems and processes that provide more risk management control and visibility, companies of all shapes and forms can maintain corporate accountability and better address governance challenges head-on.

Utilize SEC-registered Third Parties

As a business leader, you want to not only raise capital and protect yourself in the case of financial hardship, but you also want to ensure that all federal security laws are strictly followed by your business and its money managers, investment consultants, financial planners, and other third parties.

According to Treasure, a cash management platform that helps businesses transform idle cash into revenue, finding the right Treasury Management Partner means finding a fiduciary that is a trusted, SEC-registered entity and will help you maximize your earnings. That means asking the right questions and finding a financial investment team that has a history of success safeguarding business resources and working effectively with leadership teams.

The Office of the Comptroller of the Currency notes additional guidance on how to approach risk management in third-party relationships, including guaranteeing compliance with applicable laws by having SEC-registered third parties work in tandem with senior managers and the board of directors. This allows for more effective oversight over critical activities, clear areas of responsibility, thorough documentation and reporting, independent reviews, and contingency planning where necessary.

Diversify Investments and Financial Portfolio

Insights from the CEO of Rocket Dollar and member of the Forbes Finance Council, Henry Yoshida, tell us of the importance of investment diversification for Fortune companies and SMBs alike. As a critical part of any investment strategy, extending your investments across multiple asset classes allows a beneficial balance of both preparing for potential risk and protecting your company’s assets.

As a small business owner, the ability to create a financial cushion may seem impossible or daunting when considering publicly traded securities that larger companies can invest in. This is why, instead, business owners should consider investing differently and do their due diligence to make smart investments that will promote portfolio growth.

This starts with looking at the current risk profile of your business and investments, to determine your risk tolerance and capacity if economic and market conditions are less than favorable. Once you have determined your current asset allocation, ensure that you have a 401(k), IRA, or another tax-advantage retirement plan that has adequate annual contributions.

When combined, these two elements will allow you to have a better understanding of what types of diverse investments are best to include in your personal and SMB financial portfolios. This not only includes investing in bonds or stocks across various industries, but also reinvesting in your business by enhancing products or services, technologies, hiring processes, or personnel development.

Maximum Earnings Require Optimal Cash Management Strategies

For SMBs to implement more efficient and secure cash management activities, they must look beyond securing high-interest credit and business loans to support their company and workers during economically challenging times. Instead, Fortune 100 companies demonstrate the need to assess the potential of future risks, choose a trusted treasury management partner, and diversify their investment portfolio to maximize their earnings.