Bank Relation Management

| 12-12-2016 | Maarten Verheul |



There is a lot to say about bank relation management. And there are a lot of things in a bank relation that could be better. Send every information to the bank in time and do not wait until the bank asks for the information that is needed. Do not make them nervous.

Simple, do not sent your annual report to the bank, but make an appointment and speak about it. Do not wait for a reminder of the bank if you have something you have to deliver every month like inventory statement or accounts receivable statement, but communicate if you are late and when you expect to do it.

There is a lot to do nowadays. For example the ratios you have to report quarterly – do not come in default with this. Sent the ratios in time and do not wait until the bank asks for the ratios. Do not make them nervous.

Bad communication most of the time is also the cause that a company goes from normal management to special management of the bank. Not only the financial reports are the cause of going to special management of the bank. Three months ago I met a retailer whose business was transferred from normal department to special department of the bank because of bad communication. He waited until the bank asked for the annual report. Be proactive towards the bank, that is good for the relation. My advice: ‘Give your annual report to the bank when it is ready.’ Two weeks ago he told me that his shop was closed by the bank. The shop owner had his annual report ready in January, but waited till the bank asked for it in September –  with all the consequences.

Therefore a daily cash statement and a CF Planning is important. Companies that do not do that, sometimes do not know that they are running out of cash and they sent more payment transactions (in value) to the bank, than the bank can execute. The bank notices that of course. That is bad for your bank relation and before you know you are in the special management department of the bank. So cash management is a part of your bank relation management.

Make a payment statement every week, that indicates what you are going to pay. Make a note when you made a payment promise. The best is to give Accounts Payable a budget every week and let them make the payment statement. This will help you to have a payment batch with a value that is not higher than the value of cash.

A lot of companies pay too much interest on their loans. Good Bank Relation can help you to lower the interest rate. Small companies pay sometimes 300 points above 3 months Euribor rate and bigger companies pay only 60 points above 3 months Euribor rate. That is 2,4% more interest. There are always things to discuss with your bank that can decrease your rate. For example, you did a sale lease back of your real estate and because of that the equity of your company improved a lot. That is certainly a reason to decrease your rate. Another reason can be your annual report and sometimes a long term good relation can be a reason. But most of the time this is how it works with a bank:  when you do not ask you do not get anything.

maartenverheultxlMaarten Verheul – Treasury Consultant

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