Do all banks charge the same for checking account and cash management services? Definitely not!
The next time you shop for a loan, request bids on your deposit and cash management services as well. You’ll be amazed at the wide range of fees charged for identical services by different banks. In addition, you may be pleasantly surprised at the fee reductions you can achieve.
Banks typically have a 50% profit margin in their depository services. When pressed to be competitive, they have plenty of room to negotiate. To reduce the amount of checking account fees paid to your bank, consider two approaches – bidding out your services for an across-the-board fee reduction or just requesting a reduction from your present bank in certain key strategic items that cost your company the most money each month.
The Bid Approach
The most effective way to reduce all checking account charges is to bid out these services at the time of a loan request. Banks are most interested in lending money. In your loan proposal package, request that the bidding banks (usually three banks) also provide a competitive deposit and cash management proposal.
The more services you use, the more competitive banks can be with pricing. In your request, you should list all of the services you currently use and also let the bidding bank know you will entertain any ideas they may have for managing your cash more effectively.
The larger your company’s daily cash flow, the more sophisticated your cash management requirements. Typical bank services might include:
Master Concentration Account – one checking account where all funds from separate bank accounts (or even banks) are aggregated at the end of each day.
Zero Balance Accounts – checking accounts that are automatically cleared of all funds at the end of each day. (These moneys are normally deposited nightly into a Master Account.)
Online Service – The ability to access your accounts online. You should be able to transfer funds, receive and send wires, do stop payments and reconcile accounts online.
Deposit Reconciliation – You can code deposits from each site or store with a unique identifier, avoiding the need for multiple accounts (and fees).
Sweep Investment Accounts – These take any excess funds in the Master Concentration Account and automatically invest the funds overnight, boosting interest income.
Direct Deposit – Employee paychecks are automatically deposited for them, saving the time lost running to the bank each payday.
Controlled Disbursement Account – Used for your accounts payable checking account, this account provides extra float time on checks written that have not cleared or are in transit.
Lockbox Processing – The bank picks up your customer payments at a designated post office box daily and deposits them the same day to your account, speeding up receivables processing time and creating better cash flow.
Check Imaging – Another online service where the bank provides files of the front and back images of deposited checks. This is very handy for backup and gives you a wide range of search criteria when you need to find information quickly.
When you list the services you currently use, don’t forget to include any special banking packages that might be offered to employees, such as discount loans. Also include any investment and trust services used by the company or its principals. The bank earns a profit on all these services, which in turn will help you receive lower fees.
The Custom Pricing Approach
If you are not currently in a position to bid out your banking, consider requesting custom pricing on the few items costing your company the most money each month.
This information is easily obtained from your checking account analysis statement. If you do not receive an analysis statement each month of your bank’s charges, request one.
Typical analysis statements contain the actual fees charged for: checks deposited, checks paid, cash deposited, coin deposited, wires, stop payments, account maintenance fees, computer link fees, etc. Careful study of the statement will usually reveal one or two items costing the most money per month. For wholesalers, this is frequently fees for checks deposited
Once you have identified the few culprits costing you the highest fees, request custom pricing on these items. If you are paying a bank’s posted rates, you should be able to save about 25% off selected items. (The bank will still be earning a healthy profit after reducing your fees!)
If your banker appears reluctant to consider a fee reduction, casually mention you have another banker calling on you. Just the fear of losing your business is usually enough to make them jump to action. If, however, you still get no positive response, it may be time for a full bid. You deserve their best deal.
