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Joyce Ochs is a managing director of Treasury Information Services, LLC (TIS Consulting). She has been a consultant, writer, and market researcher for more than 20 years. Ms. Ochs has helped corporate clients assess and streamline their cash management operations, evaluate bank service charges and select bank services. She has also conducted surveys of cash management issues and has led focus groups and roundtable discussions on corporate treasury management and on credit and receivables management. Ms. Ochs writes for a variety of treasury management and other financial publications. She was a senior editor of Business Credit magazine, executive editor of the Journal of Cash Management, coeditor of Treasury Pro and Essentials of Cash Management (2nd and 3rd eds.), contributing editor for Corporate Cashflow magazine, and technology columnist for Managed Care magazine. She is the co-author of the Treasury Manager’s Guide to the Internet and the fifth edition of RFPs for Financial Services. Ms. Ochs holds an A.B. degree from Douglass College of Rutgers University, an M.S. degree in administrative medicine from the Mailman School of Public Health at Columbia University, and an M.B.A. degree from the Stern School of Business at New York University.

Reducing Bank Charges without an RFP

When the issue of increased bank charges occurs, many treasury managers think an RFP is the answer. Competitive bidding by banks to provide non-credit services usually does result in lower bank charges. However, the time and effort required for an RFP project is often enough to squelch the idea.

But there is a way to reduce banking charges without doing an RFP. All it takes is for you to take a long, hard look at your account analyses.

Finding and reversing errors and charges for unnecessary services in your account analysis is the easiest and fastest way to reduce what you pay for your banking services. It takes some time and patience, but it’s not hard to do.

Step One: Compare Your Account Analysis with Your Banking Agreement

To start with, you need a copy of the bank agreement that shows the services you use and the cost per service and per item, as appropriate. Most companies have agreements for two, three, or five years.

If your firm doesn’t have a fixed price agreement, that’s your first big discovery – and your first task is to get a pricing agreement for a defined period of time. It’s impossible to manage costs if the provider can change fees without your consent.

Next, check to see that you are still using the services documented in your bank agreement and that the fee is the same as in your bank agreement or in subsequent modifications. During the course of a multi-year agreement, companies often add and drop services. You should check that you are not being billed for services you have dropped. Of course, you also expect to be billed at an agreed-upon price for services you have added.

Step Two: Check Actual Charges

The next step is to review the charges for each bank account in the account analysis by multiplying actual service item charges (e.g., for items deposited) by the monthly volume and adding the account maintenance fee for a total monthly cost for each bank account.

As you do this, also verify that the fees shown in the account analysis match those in our bank agreement. Believe it or not, errors do occur.

We once had a client receive a bank proposal with a daily activity charge that was the same as the monthly account maintenance fee, but this particular service had no daily activity. Instead of one monthly fee of $130, the proposal showed a maintenance charge of $130 plus 31 days x $130, for a total monthly charge of $4,160.

 Step Three: Identify Discrepancies

Once you have verified the charges on the account analysis, you must check every bank account listed on your account analysis to see if it is still active. This is tedious but important. A lot of erroneous charges arise from “phantom” accounts.

Did you forget to close the account because it is no longer needed? Or did the bank accidentally keep it open after you requested it be closed? Inactive accounts are costly. An account with no activity still has a monthly maintenance fee.

Finally, after checking accounts, pricing, and calculating volume charges, you should be able to identify errors of arithmetic, incorrect volumes, incorrect pricing, and “phantom” accounts. Any errors you find should be traced back through previous account analyses to calculate the total dollar amount that may have been mistakenly charged. And remember that not all the mistakes are made by the bank. Any errors on your part, such as keeping unneeded accounts, should be addressed immediately.

 Step Four: Resolve Discrepancies with Your Bank

Now you have a documented list of discrepancies that you can discuss and resolve with your banker. Don’t wait. At the beginning of an RFP consulting engagement we identified $60,000 in erroneous charges made by one bank over the three previous months, and the project hadn’t yet begun!

Note: See RFP Tips for more help in deciding whether or not to do an RFP.

Joyce Ochs
Copyright 11-3-14
All Rights Reserved