I recently held a conference call with AFP’s Treasury Advisory Group to discuss the fee statements they are receiving from their banks. Generally, practitioners are frustrated because they are often unable to make accurate comparisons of the fees their banking partners charge.
We publish the AFP Service Codes but we don’t police them, and the customer typically ends up doing the job. It’s often hard to do a comparison, as we’ve heard from our practitioner members.
“There are so many codes and at a previous company we worked for, we had accounts at 87 different financial institutions,” said one treasury manager on the call. “The problem was—especially with positive pay—some institutions would back various services under one AFP code, while others would use separate AFP codes for those services. So pricing was very difficult to determine; it was difficult to do an apples-to-apples type of comparison.”
There are more than 2,500 AFP codes in the United States, and the billing is incredibly complex. There is no convention towards billing, which is why there are so many codes to accommodate the many different ways banks will charge for services. Can this be improved? Absolutely, but often the onus falls on the corporate to streamline their billing.
Bank fees help quantify the value of the relationship, but it’s often hard to do that because it’s not an equal comparison. That’s where software solutions come into play which give you access to databases. It’s not a perfect science, but a lot of companies have gone that route. Of course, we’re still seeing most companies doing their bank fee analysis via manual processes with spreadsheets or internally developed Access databases.
Ways to compare
Understand what you’re using, and go through the effort of trying to clean things up. Fine tuning your account structure would be a good place to start.
It helps to take a deep dive internally. Perhaps there’s a service you’re using that’s a ‘nice to have’ but isn’t needed. As a practitioner, a lot of my time was spent internally educating how services are being used. If your treasury, AP and payroll are all centralized and not in a shared service center in another state or country, you can easily communicate how to use those services.
Another treasurer on the call agreed. “There are two parts—reviewing all the banking fees to understand what you’re paying for, and then from there, negotiating the pricing,” he said.
Thoroughly track bank fees. As noted in AFP’s Treasury in Practice guide on bank fees, it can help to go through bank fee analysis manually. While advances in technology has reduced manual processes for treasury substantially, sometimes the only way you can be sure you’re not being charged for services you’re not supposed to is to go over every item, line-by-line.
Track FDIC fees. It can be very difficult to decipher how banks calculate FDIC charges. But as Dan Gill, CTP, former SVP of Weiland Corporate Solutions and now senior director of Redbridge Debt & Treasury Advisory explains, it helps to review the FDIC fees and dollars insured. That ratio allows treasury to compare different banks.