Bank fee analysis is one of the most mundane tasks in treasury and one of the most sought after. As one of the only areas that directly manages and attributes tangible departmental costs, it is one of the more critical tasks performed in the treasury department. Done correctly, bank fee analysis can save your company tens of thousands—or even millions—of dollars off the annual cost of bank services, making you a treasury hero. Fail to perform the task, and you will most certainly be paying more than you should for bank services you don’t need. “This is a true opportunity for someone in treasury to shine,” said Bridget Meyer, managing partner at The Montauk Group LLC, a bank fee analysis consultancy.
There’s no question that the process is worthwhile, according to Darrilyn Lawrence, CTP, treasury analyst for Lincoln Financial Group (LFG). “Significant cost savings are achieved yearly by recognizing price errors, closing accounts and discontinuing unwanted services or services no longer relevant to the account structure,” she said.
One way to gauge the potential ROI of automated bank fee analysis is to sit down and describe the cash cycle of the company, according to Dan Gill, CTP, senior vice president at Weiland Corporate Solutions. “If you do that, you can come pretty close to estimating what your bank fees should be,” he said.
“The biggest pain point, at the highest level, comes down to one of priorities,” said Gill. “The one truth about bank fees is that you can always just pay the invoice without looking at it, and as treasury organizations have to do more with less, something like bank fee analysis can easily slip through the cracks. As a result, it is easy to get overcharged.”
Top 10 Bank Fee Analysis Tips
- Review your account structure. Often companies find dormant accounts that are accumulating fees, or they can rationalize their banking relationships and save money in the process.
- Ask for a separate invoice for fees and avoid auto-deduction, if possible.
- Automate the process through 822 files. Finding mistakes can pay for the system many times over. Some companies have over 150 line items in their statements, resulting in unwieldy PDF “books” that no one bothers to read.
- Ensure your service code conforms to the updated AFP standard service code to use as a comparison.
- Negotiate and set up an explicit bank fee agreement with each bank, listing services and costs per service so the bank is contractually obligated to follow the agreed upon rates.
- To make sure you’re getting the best rates, conduct an RFP, utilize AFP’s bank pricing data, or work with outside consultants to review benchmarking data to see whether some costs are out of line. Don’t be afraid to aggressively negotiate better terms based on what a service should cost.
- Maintain an active rate table for all banks fees as a reference point. Update it as necessary as new services or accounts are added or the banks change their rates.
- Understand each line item “code” so you can tell what services you’re paying for and how much you’re paying for them. Ask the bank to provide you their list of descriptions for those codes. Oftentimes what they use differs slightly from the AFP Code Description.
- Compare current expenses to historical data to uncover discrepancies. You can spot mistakes by focusing on volume and rate, going back six months to one year.
- Track how FDIC charges are applied.
Adapted from An Opportunity to Shine: Improving Bank Fee Analysis, from AFP’s Treasury in Practice series. Download the entire document here.