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How Agencies Can Successfully Manage Cash in a Rising Rate Environment

Automated cash management sweep products can be a valuable tool to help agencies simplify cash inflow and outflow.
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how agencies can successfully manage cash in a rising rate environment

Cash management involves monitoring and controlling cash inflows and outflows, investing idle funds and maintaining expenses. It's an essential aspect of running any successful business and independent insurance agencies are no exception. Regardless of their size, focus or location, agencies need to manage cash effectively. 

With interest rates currently on the rise, independent insurance agencies need to be especially mindful of their cash management practices to maximize the value of their cash, ensure they have the funds they need when they need them, reduce the risk of financial difficulties, and improve their bottom line. 

Effective cash management is essential for all strategies, from expanding an existing agency, starting a new one, or simply maintaining financial stability. For example, if an agency is looking to expand, it needs to have the cash flow to support new hires, marketing campaigns and other growth initiatives. On the other hand, if an agency is focused on maintaining financial stability, it needs to be mindful of its expenses and cash flow to avoid financial difficulties. 

Automated cash management sweep products can be a valuable tool for independent insurance agencies. These products simplify the cash management process, reducing the time and effort spent on manual money management by helping monitor and control cash inflows and outflows, invest idle funds, and minimize expenses—allowing agencies to maximize the value of their cash. 

Cash management sweep products allow agencies to automatically sweep excess cash out of their operating accounts into high-yielding accounts, helping them to earn more on their funds. Agencies do not have to monitor interest rates or transfer funds manually, which frees up time and resources for other tasks. 

They also allow agencies to optimize their commission flow—another crucial aspect of an insurance agency's financial health. By maximizing commission flow, agencies can earn higher returns on idle funds, improve their overall cash flow and ensure they have enough cash on hand to cover expenses and invest in growth opportunities. 

It is important to remember that the insurance industry is consistently evolving, and it is essential for independent insurance agencies to be proactive and responsive to changes in the market. Now may be the perfect time to reevaluate your agency's banking relationship and take advantage of rising rates. 

By taking advantage of a rising rate environment and optimizing cash management strategies with a cash management sweep product, agencies can build financial strength and position themselves for success in the long term. 

Patricia Smith is vice president and director of cash management services of InsurBanc, a division of Connecticut Community Bank N.A. She manages and develops effective cash management solutions for independent insurance agencies across the country.

Monday, June 12, 2023
Agency Operations & Best Practices