Source: KPMG Corporate Treasury News, Edition 43, May 2015 - "What bank charges do I actually pay? And are they reasonable?" These are the kind of questions that can cause embarrassment to cash managers, who often lack sufficient transparency to provide clear answers.
Yet are the questions relevant in the first place? I believe they are! In a Germany-wide survey conducted in Q4/2013, 11 percent of respondent companies put their annual bank charges at more than a million euros. At a time when corporate finance and treasury functions are being called on to focus on efficiency and cost awareness, it is therefore perfectly legitimate to query the composition of charges for banking services, ask whether they are justified and look for ways to sustainably reduce them.
The first step toward active cost management is to create transparency about the actual charges incurred for payment transactions and other banking services. This alone is a challenge for most companies, as the necessary data can usually only be gathered – if at all – with a great deal of manual effort. The costs incurred must be analyzed from every angle and compared with the contractually agreed terms – a task that is painstaking and time-consuming, as the following considerations illustrate:
Although one-time manual "harvesting" creates an initial set of data resources, this is anything but efficient as a regular process. A different approach must therefore be adopted if cost management is to be placed on an active, rules-based footing:
Once the data has been collated, the second step toward active cost management can be tackled. This involves defining measures to cut costs.
Quick wins – cost items that can be reduced at short notice – can be realized if data transparency allows services to be identified that are no longer needed or, in the worst case, are not even used. One example is the identification of accounts that are no longer needed, but for which account management charges are still being billed.
These short-term measures must naturally be complemented by more long-term ones:
To summarize: Sifting through bank charges by hand and drawing up an initial list of cost drivers is a laborious but essential one-off activity if a company is to gain a transparent overview of the banking services it uses and what, exactly, they cost. The key levers for sustainably cutting these costs are to reduce the number of bank accounts and to consistently apply a core banking strategy. The whole procedure must be supported by integrating and applying suitable IT tools in order to realize smooth, seamless processes. Implementing these measures demonstrates the treasury unit's cost awareness – and provides reasoned, substantiated answers to the two supposedly tricky questions with which we began: "What bank charges do I actually pay? And are they reasonable?"
Author: Nicole Fritsche, Manager, firstname.lastname@example.org
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