Posted: January 17, 2014
Bank benchmarking for business
Common problems that can be avoided by an annual examSteve Shear
In the business world, things move quickly. Technology is always changing. Regulations are always changing. While the banking industry mandates that consumer clients receive notices of important changes and regulations, commercial clients do not always receive the same treatment. Frankly, when you are dedicated to building and growing a successful business, it’s hard for anyone to keep up.
Doing an annual benchmark review can assess your account structure, current products and fees, and business operations from top to bottom. The biggest red flag that we see over and over again with commercial clients is that they establish a collection, disbursement and concentration strategy to manage liquidity, and then never go back to review it. Ideally, this should be done annually and before your busy season.
Here are three steps that can help you avoid common pitfalls:
1. Review your current account structure.
When we meet with prospective clients, the first step is always to analyze their bank statements. Too often we realize they’ve been operating under the same collection and disbursement plan for ten years. We commonly see businesses that have outgrown their current structure or whose account structures are no longer appropriate for their business type.
2. Review the products and services you’re currently using.
Every business requires its own set of services to effectively manage its cash flow and reach its goals. It’s important to take advantage of the right products and services to fit your needs and protect your business. Every year we assess whether our clients are using all the technological advancements available to them to avoid fraud, mitigate risk and operate efficiently.
Hidden fees can also have a huge impact on your bottom line, so we always help new clients understand what they are currently paying and evaluate the effect those payments have on their cash flow. From there, we determine if any changes are necessary.
3. Assess new regulations and the impact on your business.
For example, on Dec. 31, 2012, the unlimited insurance coverage for non-interest bearing accounts (known as TAG-P) expired. This coverage, provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act, gave many business owners the security of full FDIC insurance and the convenience of maintaining one banking relationship. In many cases, we have found that business owners were unaware of the ways that the expiration of TAG-P had impacted them.
The Affordable Care Act is now requiring many businesses to provide health insurance for employees, and it affects the smallest startups to the largest corporations. There are a lot of new rules, reporting requirements and costs to keep track of. We help businesses assess how these regulations affect cash flow and how best to move forward.
While consumers often receive the most attention when new regulations or technologies come into the banking world, we recognize the importance of sharing this information with commercial clients. As consumers, we’ve learned to address many common banking problems but it’s critical that businesses not overlook these areas. A banking annual exam is an easy way to avoid hitting snags that can hurt productivity and profitability, so that your business can be efficient and poised for a successful year.
Steve Shear is responsible for First Western Trust's operations and the implementation of all Treasury Management products and services. First Western is a private bank and trust company that has offices in Denver and other locations throughout the west in Arizona, California, Colorado and Wyoming.