When working on your 2015 budgets, how are you budgeting for bank fees? Many Treasurers and Cash Managers make the mistake of simply using last year’s net fees, plus a 3% increase, but forget to consider events that could drastically alter the cost of banking services.
1. Reducing cash balances in DDA accounts will reduce the amount of earnings credits applied to offset fees. If your company is tracking net fees as a single expense item, instead of splitting gross fees as an expense item and earnings credits as an income/revenue item, the impact of cash balances needs to be considered.
2. Acquiring a new line of business, opening new stores or locations or bank accounts, or adding bank accounts overseas? Don’t assume that those new accounts will automatically be priced in the same way as your existing portfolio. Be sure to inflate the budget for bank fees to allow for implementation fees, programming costs (internal and external), and maintaining open accounts in multiple places during any transition.
3. Do you consider expected changes in interest rates in your forecasted bank fee budget? With rates expected to rise at some point in the future (they can only go up from the current), Cash Managers should also conservatively forecast a rise in the ECR and corresponding earnings credits.
4. Implementation of new services and technology such as treasury workstations, remote deposit, outsourced payables, and e-receivables products will all have a considerable impact on bank fees. While reducing internal soft costs, these efficiencies may end up increasing the hard costs associated with bank fees and need to be included in your budget.
5. The experts at Montauk help companies save an average of 28% on bank fees through service restructuring, price reduction, and yield improvements. What more could you afford if your bank fee budget was reduced by 28%?
While the majority of companies spend between $2,000-$10,000 per month in bank fees, 26% spend more than $50,000 a month for treasury services. It is surprising how many companies do not budget for bank fees or consider the impact of the events above as part of their yearly budgeting exercise. Perhaps it’s time to take a second look at your budget for bank fees and then give Montauk a call.
Managing Partner, Bank Relationship Management Products & Services
The Montauk Group, LLC.