Treasury Management: Saving Money Through Bank Account Analysis

Treasurers could be leaving money on the table if they’re not minding bank accounts. 

There are probably more pressing Treasury issues these days than bank account analysis and automation. Still, disregarding it and the many improvements in this area over the years, may mean treasurers are leaving money on the table.

The industry has come a long way in improving how bank fees are reported. But with the previous widespread adoption of the 822 ANSI standard in the US and the more recent development of its global successor, the BSB (bank standard billing), banks and corporates are now aligned and have created a world of bank-fee transparency. The improved clarity allows for full understanding of banking costs, eliminates surprises and makes future negotiations easier.

Most importantly? Your banks are kept honest.

One of the main obstacles to keeping better track of bank accounts was the seemingly time-honored tradition of hidden bank fees. Listed among the hundreds of price codes on a monthly bank fee analysis, these fees more often than not went unnoticed.  Traditionally, banks were either not challenged for incorrect fees or not that helpful in correcting errors. They distributed lengthy paper reports via the mail that were scoured by treasury staffs – when time permitted. But that was then and this is now; both financial institutions and companies have joined forces to enhance the production, delivery, control and review of bank fee reporting by creating standards and electronic data feeds that integrate with corporate systems.

Automation to the rescue. Whether it is purchased software or an internally built program, automated solutions are helping to make the execution of this control smoother sailing for treasury groups.  In-house options often involve integrated and conversion programs, and customized reporting.  Many employ IT resources to find the best fit and solution to their particular treasury operation. Multiple bank feeds complicate the process, but in the end it is worth the effort as you gain insights, recover costs and potentially reduce overall bank fees.

How does it work?  Data feeds from provider banks – US domestic bank primarily use the “822” standard electronic statement standard – are used to automate the review process, matching charges against preset negotiated fees, and producing “kick-out” reports that highlight differences for further review and action.  By listing unknown fees that appear on your analysis statement, treasury staff can assess whether these additional costs are accurate – actually incurred as a result of a service, and furthermore, should be added in the future as an approved fee. It could be that these “new” fees are banks’ way of assessing new charges and bypassing corporate review. Either way, your procedure should include follow-up with your banks to address discrepancies highlighted in the reports.

Here are few other ways to better manage bank fees:  

1. Your bank agreement should include specific wording to the effect that add-on fees are not allowed without prior contractual consent of the company. These “unknown” fees can add significant costs over time.  With proper accountability and control, corporate treasury can keep abreast of new fees charges and challenge your service providers to ensure your banking fees are only those negotiated.
2. Document your bank price list via an RFP proposal list or addenda item to the service agreement. Clarify in the agreement how any changes to the price list are communicated and ensure that you are given ample time to counter the changes before they go into effect. For example, “30-60 days prior notice must be given.”
3. Avoid “opt out” clauses which can be tricky in that you need to communicate specifically with the bank that you do not want a particular service.  Do not allow such clauses on a service or pricing documentation.
4. Pay attention to volume levels not just the pricing. It may be prudent to have a report that can flag or otherwise trigger a warning when volume changes significantly. One practitioner noticed an excessive increase in costs which ended up actually being due to erroneous volume level in the analysis; the fee charge per transaction was correct but volume levels were off.  Unusual perhaps, but it can happen. So more than a simple kick-out of fee variances is needed in the reporting- test the validity of the data.
5. Bank account statement data can provide a window into internal processes and used to spot opportunities and redundant practices within the operations of a firm. Review potential improvements with your banks.
6. Clarify the bank credit process with your banks. In the case of one corporate treasury department, their banking partner allowed retroactive credits based on their assessment of erroneous bank fees charged over a number of years which was not caught earlier. Your bank may be willing to work through a one – time negotiation or credit applied as an accommodation. Most banks will offer credits due clients in the current year but, beyond that, it gets complicated and higher level approvals may be needed for any fee adjustments.

Electronic bank-fee analysis, industry coding and reporting standardizations over the years have been a windfall to treasury managers. With the ability to better track and monitor the increasing number of bank services treasurers buy — while banks leave their paper reports behind — some experts say companies are saving billions of dollars. Automating and better manage bank fees will ensure treasury is capturing its share of the money.