Manage Your Banking Relationship

How could the current financial crises been avoided? The answer is really easy: due diligence and transparency. Those were the things missing in the financial institutions and with investors over the past few years, especially in the case of sub-prime mortgages used to create bundled securities. While it may be too late for many of them (and unfortunately for us taxpayers), we can still learn a few lessons that can help us run or manage any kind of business.

Over the next few weeks we will discuss different aspects of using due diligence and transparency in your business.

Meet with Your Banker Regularly

Part of financial due diligence in operating a business is having a financial representative (i.e. Owner, CFO, Controller, Business Manager) scheduling regular meetings with your bank representative. Prior to the meeting, create an agenda and list topic areas to be discussed. These should include things like:

• Future financial needs for expansions or acquisitions, like lines of credit or loans

• Best use of cash accounts like sweep accounts to maximize return and minimize expense

• Short and long term investment options for a practical liquidity tree

• Use of merchant accounts

Plus, in these times it may not be a bad idea to discuss the bank’s liquidity and financial stability, especially if you have money in non-insured accounts. Be prepared to ask questions that require details, not unresponsive platitudes. Don’t be afraid to ask follow up questions if answers are not satisfactory, after all, your money is in that bank. The bank sure doesn’t hesitate to grill you about your business when the money flows the other way.

Be Prepared – Ask the Right Questions

Besides creating an agenda, other planning activities prior to the meeting could include reviewing account statements to ensure the information about rates and fees are accurate and up-to-date. Also consider reviewing the bank’s website and promotional materials. Are they offering better rates or services to newly opened account holders? Is that fair to a loyal customer like you?

Another prudent measure would be to talk to your bank’s competitors about their account options and rates. It may not be wise to switch banks every time one offers a slightly higher rate or a slightly lower fee, but due diligence is also exercised by knowing your banking options. If a competitor consistently has advantageous rates and services, and perhaps meets other criteria as well (professional representatives, convenient location, etc;), then you may want to consider starting a relationship with that bank.

Transparency and due diligence is needed all through your business, but especially in the financial operations. An easy first step is transparency and due diligence in managing your banking relationships.

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Originally published in 2008 by Bizmanualz, Inc. under the title Manage Your Banking Relationship. All rights reserved. Reproduction permitted with attribution only. www.bizmanualz.com