Four years ago, John Dews, the president of NBC Bank Corp. of El Dorado, Ark., got a wake-up call about the importance of cash management services.

"We had one customer that was ready to move a significant cash deposit out of state simply to access cash management," says Mr. Dews.

Rather than lose the account and possibly others, Mr. Dews spearheaded the banking company's creation of an overnight cash sweep account.

The task was not as difficult as he expected and it satisfied the customer. In the nearly three years since, the bank has won several commercial customers away from competitors, he says.

NBC Bank Corp.'s experience is like that of hundreds of other community banks: technological advances now allow them to offer necessary cash management accounts to small-business customers.

In fact, these institutions have had little choice.

Small-business owners, increasingly sought out by larger banks, are less likely to keep money tied up in poorly paying deposits. In "Community Banking: Today and Tomorrow," a recently released study of 815 banks by Grant Thornton, a Washington-based consulting firm, small banks said they are adding cash management services like sweep accounts, automated clearing house services, and merchant services.

"Community banks are pretty dedicated to serving the needs of the customers that they have," says Diane M. Casey, national director of financial services at Grant Thornton.

Grant Thornton's study found that 29% of community banks offer cash management services to small businesses, compared to 26% in last year's study. And 71% of the banks surveyed say they plan to offer some form of cash management within three years.

Still, of the smallest banks - those with less than $100 million of assets - 28% says they do not plan to add cash management services to their menu.

Ms. Casey points out that many of these banks do not believe that their customers require cash management. Many community banks focus on retail customers and therefore are not concerned about commercial cash management needs, says Darla J. Brogan, a senior consultant with Professional Bank Services, Louisville, Ky. They are less inclined than their larger competitors to experiment with new products, she says.

Some community banks say there is no point to making such offerings because many parent companies require their business units to use a specific institution, Ms. Brogan says.

But cash management services are crucial to success for banks who value their business customers, says John M. Bond Jr., chief executive officer of Columbia Bancorp in Columbia, Md.

"I think it's a virtual requirement if you're going to be a commercial bank," Mr. Bond says.

Columbia has been a trailblazer of sorts. Just 11 years old, the bank has $500 million of assets and boasts a big array of cash management services, including lockbox, electronic payments and receipts, electronic balance reporting, cash verification and processing, and account reconciliation services.

Mr. Bond and Robert Dael, who is in charge of Columbia's cash management services, say the bank's founding managers had an advantage 11 years ago when it was more challenging for smaller banks to build such services.

"We all had big-bank backgrounds and understood cash management," Mr. Bond says. "We started looking for niches were we could really succeed."

The centerpiece of their growth has been a relationship with Dunbar Armored Inc., which transports cash in armored vehicles. The bank has set up operations everywhere its partner Dunbar has cash verification sites - 48 in eight states.

The bank tries to improve on that relationship and offer complementary products, Mr. Bond says.

Columbia has relationships with both big and small customers.

The bank is the second-largest depository institution for McDonald's corporate-owned restaurants. It also serves the parking lot operations for two airports as well as many smaller business operations.

Mr. Bond would not release numbers related to the cash management business. But he says it is profitable and that other lines of business would suffer without it as customers would migrate to companies that do offer the services.

Any bank serving customers from small retailers to sophisticated high- tech corporations has to meet those customer's needs to succeed. Says Mr. Bond bluntly, "We don't expect our customers to bank with us out of charity."

"The technology is so readily available on an off-the-shelf basis that we can buy what we need," he says.

While money-center banks court customers with the array of services they say they can tailor to a customer, Columbia takes a different approach. Mr. Dael says he tells customers they really need to do business with the smallest possible bank that still meets their business needs.

Even a McDonald's likes personal service instead of being another customer at a bigger institution, he says.

None of NBC Bank Corp's cash management customers are insignificant because the south-central Arkansas bank only has seven. They account for about $10 million of deposits and $6 million in loans - a big chunk of business for the bank, he says.

Mr. Dews believes his cash management product has met the need of his customers who were frustrated with the manual aspects of sweeping money into a money market account.

"My product probably lacks some of the sophistication of some of the larger market customers," but it works, he says.

The product sweeps cash into a pooled account that invests in surplus securities in the bank's own portfolio, Mr. Dews says. The bank's trust department serves as custodian of the account.

In order to keep track of the repurchase account, one bank employee spends about half an hour a day updating information in the computer. The computer generates a summary of the activity, including balances and securities that have been sold. Then it automatically faxes information to the companies, Mr. Dews says.

The account typically pays 100 basis points more than a money market fund, he says.

"Once established, there's nothing required of the customer," he says.

That simplicity is a boon to the people who have had to manually account for moves between accounts and money market funds, Mr. Dews says.

So far, the company has added three commercial customers, each with accounts in six figures.

"We're trying to get the lady who's been moving all the money around and then it's a really quick sell."

To develop the sweep account, the bank spent $5,000 in legal fees. Mr. Dews did much of the product research himself.

Getting the regulatory approvals required to have daily repurchase agreements was probably the most difficult, he says.

The technical aspects were surprisingly easy because software existed that could be added to the system, he says.

It is that ease of update that has simplified the task of offering cash management for small banks, says Ms. Brogan of Professional Bank Services. "The systems that banks are using these days are allowing them to do cash management services," she says.

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