Commercial banking services are essential for a business to operate, but can also add significant cost to the “expense” side of your ledger. It is every business owner’s goal to run their business efficiently and control costs – so how do you navigate or negotiate necessary banking services at a cost you can manage?
First, you must have realistic pricing expectations and a clear understanding of what products and services you are using with your bank. Your banker should be meeting with you on a regular basis to review your accounts, services, pricing and potential new or better solutions. Some questions to ask your internal team before you reach out to your banker might be:
- Does your current bank relationship meet all of your business financial needs?
- Do you use all of these accounts and services that you currently have set up?
- Do the benefits to your cash management process outweigh the cost of the services?
- Are there new or better solutions that are less expensive that you should consider?
- Could you change any of your account structures or processes to help reduce some of the fees?
- Is your bank offering any discounts or earnings credits for the balances you keep on hand?
- Are you receiving any discounting for the value of your business? If you are benefitting from “exception pricing” when does the pricing expire and will you be notified of the new pricing?
Second, when talking to your banker, be sure you are requesting reasonable demands for discounts, waived fees or exception pricing. Quality banking products and services do have costs involved, but the cost should be justified by the function the service provides to your business (i.e. fraud prevention, ACH payment generation, reconciliation services).
In addition, the deeper your relationship with the bank and the more products and services you use with your bank, the more valued your client relationship will become for the bank. For example, if you only use a bank to deposit your cash deposits, you can expect that your fees may be higher, as cash processing is very expensive for a bank and they get no revenue benefit from other services. In contrast, if your services include loans, deposits, merchant processing, and/or a commercial credit card, you would most likely receive more favorable pricing based on the depth of the relationship.
When all else fails, you always have the option to shop the competition. While changing commercial banking relationships can be cumbersome, you may benefit by moving your depository business to a bank where you can build a more robust relationship and benefit from better pricing.
And remember, it is important to monitor and question your bank pricing annually. Just like reviewing your insurance options and pricing, a good best practice includes reviewing bank depository pricing, as well.
Laura Gaythwaite, Concannon Miller's Director of Business Development and Client Relations, is a Certified Treasury Professional and worked in the banking industry for 19 years before joining Concannon Miller. She can be reached at firstname.lastname@example.org for additional business financing advice.