Small businesses are squarely in the marketing sights of bankers looking to expand their cash management businesses.

Traditionally focused on large and middle-market corporations that could deliver significant revenues on a single sale, cash management units have had to spread their wings as competition has increased for a shrinking number of potential customers.

The American Banker/Payment Systems Inc. small-business survey indicated significant potential for growth among the millions of enterprises with less than $10 million of annual sales. Less than 10% of the small companies said they use such services as lockbox, account reconciliation, check imaging, zero-balance accounts, and coin and currency

processing.

The increasing availability and power of personal computer technology makes cash management an attractive proposition for both banks and small businesses.

"The demand is large and growing larger as more businesses get PCs and realize they can do banking over PCs," said David Voris, executive director of national treasury management services at Banc One Corp., Columbus, Ohio.

Marketing of cash management to small businesses is not new. A Consumer Bankers Association survey this year said 72% are doing it.

But few banks do it vigorously, said Charles Wendel, president of New York-based Financial Institutions Consulting. And much of what they offer are jerry-rigged versions of products originally intended for larger companies.

"Banks haven't focused" on small businesses, said Daniel Drechsel, general manager of ECPartners, a joint venture of Automatic Data Processing Inc. and Checkfree Corp. "They haven't felt the crushing competitive need they have on the large corporate side."

This is likely to change as PC banking grows more popular among small businesses, Mr. Wendel and others said.

As a sign of their commitment to small-business cash management, several banks, including Banc One Corp. and First Union Corp., have named executives to champion the cause.

"My job is to go out and see what the customers need," said Frank Carter, manager of First Union's small business market segment.

Right now, the cash management needs of small businesses are simple, said Mr. Carter and his supervisor, Eddie Link, vice president of cash management.

"The needs of small businesses are not the same as large corporations," Mr. Link said. "We've found that their needs are more basic" - such as balance information.

To meet that demand, First Union has offered a PC banking service since the early 1990s.

The Charlotte, N.C., bank just started offering a "business fax" product, delivering daily account information by fax, Mr. Link said. First Union is promoting it through a direct mail campaign.

But First Union is also offering more sophisticated products, including a small-business payroll package with a direct-deposit feature to customers in Georgia and Tennessee.

"Every small business has a payroll need," Mr. Frank said.

Indeed, direct deposit is one of the more popular cash management products, with 15% of small businesses offering it, according to the American Banker/PSI survey.

"Direct deposit will be an area of tremendous growth because employees like it and it saves companies money," said Barbara Konecky, BankAmerica Corp.'s automated clearing house product director.

Wire transfer is a more widely used service, at 32%.

Mr. Drechsel said small companies tend to use wire transfers only occasionally, for relatively large transactions.

The survey also found that 14% of businesses use preauthorized ACH debits, which brings in customer remittances automatically; and 22% participate in corporate-to-corporate ACH transactions.

Banc One's PC product, "Business Information Manager," gives small businesses the capability to do wire transfers and automated clearing house transactions, Mr. Voris said. Moreover, the banking company is developing new bill payment products.

As the government moves toward requiring that taxes be paid electronically, Banc One and others are moving to fill that need.

While they are just scratching the surface in small-business cash management, bankers expect to grow rapidly as technology becomes more affordable and easier to use.

"ACH 10 years ago was very much a mainframe operation," Mr. Link said. "Today it's very simple to install a package and operate it. We've made it very simple."

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