Executives who fail to maximize their banking relationships may miss out on opportunities to improve cash flow, garner attractive financing rates or off-load the processing of rudimentary accounting transactions.
On the surface, this seems like an avoidable problem. After all, executives need banking services to drive revenues and profits, and bankers have a bevy of programs at their disposal. But executives are often paired with novice bankers who lack the business acumen to embrace their vision, suggest appropriate solutions or advocate on their behalf.
“Executives shouldn’t settle for an order-taker or a lackadaisical banking partner, because they have a lot to lose,” says Simon Oh, first vice president and manager of the Irvine Branch for Wilshire State Bank. “Insist on regular account reviews, a customized service plan and advantageous rates, or go find another banker.”
Smart Business spoke with Oh about the techniques and strategies that maximize banking relationships.
What should executives look for in a banking partner?
Banking relationships are unusual, because bankers actually play a dual role. They not only represent the bank to the client, they represent the client to the bank and negotiate on their behalf. To execute this delicate yet strategic mission, your banker should ask questions, understand your business objectives and obstacles and offer a customized suite of services and rates that will help you meet your goals. Unfortunately, new bankers often take a transactional approach to client relationships and tout the product of the day instead of recommending services you really need. It’s better to surround yourself with expert advisers like a knowledgeable banker, lawyer and CPA, because each member of the team offers wisdom and solutions that can help you grow your business.
What’s the key to the selection process?
Ask the banker about his experience, whether he’s familiar with your industry and how he’s helped other companies facing similar challenges. You want to assess his listening skills and his ability to analyze your financials and develop solutions before making a commitment. Finally, evaluate his aggressiveness and his willingness to offer competitive terms. Some banks are more business-friendly than others and your ability to strike a good deal may hinge on your banker’s negotiation skills and tenacity.
What’s the best way to manage a banking relationship?
First, meet with your banker at least once a year, or more often if you’re contemplating a major change like buying a building or using a line of credit to finance an acquisition. Think of a visit with your banker like a visit to the dentist, because it’s better to diagnose and fix problems before you suffer a financial toothache. Share your concerns and expectations, your five-year business plan and your current financials and tax returns, so your banker can suggest services to help you meet your goals and proactively assess your borrowing ability. You’ll be poised to pounce on an emerging opportunity if you know your borrowing capacity and interest rates beforehand. Additionally, your banker should analyze your company’s turn on receivables and debt ratios and then suggest ways to meet or exceed the industry norm; his job is to make sure your financials support your vision. Finally, be ready to negotiate. While banking services are not free, you can garner better rates by consolidating all of your accounts and services with a single bank.
Which banking services incite growth in a stagnant economy?
In times like these improving cash flow is invaluable, and banks offer services that speed up the collections cycle and allow businesses to hold on to their cash for as long as possible.
- Remote deposit services. This service allows businesses to deposit checks immediately without leaving the office.
- Automated Clearing House (ACH) origination. Provides businesses with the ability to collect fees for products and services on a timely basis by directly debiting client accounts.
- Online bill payment. Businesses can schedule exact payment dates, instead of relying on the postal service and issuing checks days or even weeks in advance.
- Online domestic and international wire transfers. Negotiate exchange rates up front and capitalize on advantageous rates by paying invoices in foreign currencies.
- Outsourced receivables and payables. Outsourcing rudimentary accounting transactions to your bank often improves cash flow and security while allowing your staff to focus their time and energy on revenue-generating activities.
- Seasoned banker. You’ll miss out on important benefits unless you partner with a seasoned banker who can spot a need and recommend a solution.
How can executives leverage their banking relationship to strike a better deal?
Although most services have fixed pricing, many banks consider the entire customer relationship when negotiating fees. Research the market, so you know the going rate for services and products before you meet with your banker, then unleash your secret advocate and let him lobby on your behalf.
Simon Oh is the first vice president and manager of the Irvine Branch for Wilshire State Bank. Reach him at (714) 665-6801 or [email protected].