• Phone: 855.MONTAUK (666.8285)
  • Email: upside@themontaukgroup.com

Clients don’t get “Fired” for Pricing Requests

If you push for reduced pricing on treasury services, will the bank pull your credit line?  Raise prices on merchant services?  Tell you to find another bank?

Never in all of my history as a banker, or in our bank discussions at Montauk, has a bank even so much as threatened to ‘fire’ a client based on a request to reduce pricing. The more likely response to a request they do not want to honor is simply “No.”  The thing to remember is that you will never get reduced pricing, or a “Yes,” unless you first ask the question.

Michael Kennedy

Senior Client Relationship Manager
The Montauk Group, LLC.

Does your bank want you to leave?

While it is somewhat common for companies in “high risk” industries to find themselves with a notice to move elsewhere based on a change in a bank’s risk appetite or compliance issues, it is extremely uncommon that a bank would turn away business from a profitable and creditworthy customer.  If they truly do not want a certain type of business, or a specific client, the more common approach is to raise prices above market, or simply start to be slow when responding to service requests, as a polite way to encourage clients to leave.  If you do not know how your fees compare to the market or pay enough attention to your statements to notice the price hike, you could be missing the point.

Is your bank trying to get rid of you?

Michael Kennedy

Senior Client Relationship Manager
The Montauk Group, LLC.

Why am I passionate about account analysis?

Bridget-Meyer, CTPWhen I started at the US Treasury department many years ago as a young analyst, I was given an assignment.  I was asked to review the pricing from the different banks for all government agency lockboxes to determine which bank should receive the new business.  Sounded simple.  We utilized an account analysis software to manage our fees, so I pulled a report for each bank for the most recent month and prepared to dive in. And then I cried.

Okay – maybe not out of sadness but out of pure frustration.  One bank had 300 service line items.  The other had 90. Some charged per record; others per file. Trying to compare apples to apples across 5 different major money center banks proved impossible to my inexperienced eyes.  When I asked if anyone had definitions of services for each of the banks, I was handed a TMA (Treasury Management Association) Code book.  (Funny how you can never see how little events today will play into your future.)  The Code book did not help me in my assignment because I did not have the base knowledge to understand how to apply each code properly. In defeat, I had to tell my manager that in order to complete the assignment, I would need to call in each banker and ask them to define each and every line item first; only then could I perform the exercise. With my current priorities, I needed his permission to switch gears.  They ended up hiring a consultant, paid $25,000 (more than my entire year’s salary), and the consultant completed the project in two weeks.  I was in awe.  I was annoyed. When I asked him how he knew how to compare the different services, he said, quite frankly, that he mostly just guessed!

A spark turned into a flame. I volunteered on the AFP (Association for Financial Professionals) Code Revision Panel and learned how to use the codes.  I started monitoring the bank fees for the IRS and I saw how banks agreed to 5 years of fixed pricing in our RFP, but renegotiated higher prices within a year.  When I was given the opportunity to help AFP roll out the AFP Service Code Accredited Provider program and help banks fix their assignment of AFP codes –I took it. When I learned of and met the folks from Montauk, it was a match made in heaven.  MY mission turned into OUR mission: 1) To help bring clarity to the cloudy world of account analysis, 2) To help corporate treasurers and their banks to understand the world of bank billing both domestically and internationally, and 3) To complete the assignment I was given many years ago for everyone who will let me.

Bridget Meyer

Managing Partner, Bank Relationship Management Products & Services
The Montauk Group, LLC.

Bank Relationships Among Top Priority for Treasurers in Europe and Middle East

surveyAccording to the study just released by “Treasury Today,” corporate treasurers are ranking their bank relationships as one of their top 3 priorities for this year in Europe and the Middle East. (The survey does not focus on the US)  “As the treasury priorities rankings show, the corporate relationship with its bank(s) is also changing to one of less dependence upon credit per se to a consultative, advisory, guidance and solutions-based approach in the truest sense. Moreover, with the heavy burden that regulation and compliance places on the corporate, as well as the many aspects of risk it must now contend with, the banks will need to redefine their transaction banking propositions to their corporate clients if they wish to retain them.”  Banks are also being told to focus their energy and resources on closing service gaps in the most basic of treasury and cash services.

The study results confirm that focus is not on the bank relationship in Asia. This is consistent with the lack of interest in the Bank Services Billing statements and other international bank relationship management efforts in that region.

Companies in the US are continually frustrated with the complexity and lack of transparency into bank relationships overseas. This is your opportunity to let your voice/concerns be heard in a constructive manner.  To provide anonymous feedback regarding your global banks (and the relative level/depth/suitability of services being provided), I encourage you to register to participate in the 2015 survey that will be released this summer. Contact john.nicholas@treasurytoday.com to be added to the list.

Bridget Meyer

Managing Partner, Bank Relationship Management Products & Services
The Montauk Group, LLC.

Why this veteran banker joined The Montauk Group

Michael Lenihan

Having spent almost 35 years selling corporate treasury management services with 4 money centers and two super regional banks, I have a deep understanding of the different TM pricing practices and methodologies used in account analysis creation among banks.

I know the complexity and pressures within banks’ treasury management divisions to grow revenue and to reinvest in new product capabilities by deepening and broadening the service line-up and the many features that differentiate their offering from their competition.  It’s no secret that there are over 2,800 AFP codes available to help both banks and corporations track their service revenue and costs. Banks can track the revenues down to the desired sub-service level, and corporations can track their costs and also attempt to compare apples to apples among their banks.  I know first-hand how those complexities and pressures often lead to some questionable practices that may benefit only the banks and therefore reinforce the “let the buyer beware” rule.  Typically, you might not think to beware when dealing with your ‘trusted’ bank relationships.  You should. The following story, my story, will show you why. Read More →

Do you budget for bank fees?

bank feeWhen 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.

Bridget Meyer

Managing Partner, Bank Relationship Management Products & Services
The Montauk Group, LLC.

The 822 and BSB Electronic Statements. Are they for me?

Wouldn’t it be nice to have all commercial account bank billing statements, domestic and foreign, available in a standard, electronic format? Then I could use “electronic eyes” to check for billing errors, detect unused services, examine balance usage, bill services to the appropriate departments, aggregate costs on a global basis, budget for the future, analyze trends over time, compare prices, pay bills and get rid of all those mounds of paper statements and 300 page PDFs. This vision has become reality. The US based 822 and now the global BSB provide all this and more – at your fingertips.

It began in the early 1990’s with the advent of the ANSI 822 electronic billing standard. At the urging of major US corporations and with the help of the Association for Financial Professionals (then known as the NCCMA) the 822 standard was developed. Today every national bank and all regional commercial banks offer the 822. Over 1,200 corporations now receive and use the 822 and have experienced major cost savings and analytic benefits. The success of the 822 in the US provides a dramatic “proof of concept” of electronic bank billing statements for commercial accounts.

But what about offshore accounts? The 822 is a US ANSI standard. Companies used to the US standard were disappointed to learn that electronic billing statements in a standard format did not exist outside the US. But now that void has been filled with the BSB, Bank Standard Billing statement, first from TWIST and now under the ISO20022 standard. Read More →

Negotiate, but what about?

Ever look at your monthly bank fee spend and wonder if you are paying too much? Thinking you’d like to negotiate better terms but don’t know where to start?

The first step is to gather the past history of your accounts in terms of fees, rates, errors and balance levels. Knowledge is power when you come to the negotiating table. If you don’t receive statements in an electronic format or you are not a current Montauk Hawkeye client, you shouldn’t underestimate the level of effort required to consolidate this information across all accounts – especially from paper or PDFs. Read More →

The Compensation Cycle

Let’s say you’re on a monthly Compensation Cycle for your analysis and billing statements. This means that you receive a statement every month and your compensation to the bank, if any, is due every month either by direct debit or by an invoice. If you’re offsetting fees with earnings credits (which means that your fees are “balance compensable”) and if you have an excess of earnings credits, then what happens to this earning credit excess? The answer is that it goes bye-bye. You lose it. Let’s give an example.

Let’s say that in the months of April and May you ran an earnings credit excess (your balance based earned credits exceeds your charges) and in the month of June you ran a deficit (your balance based earnings credits could not cover your charges and you were in a deficit position). Since you are in a monthly compensation cycle you loose your April and May excess credits and you have to pay the bank $70.00 in June. Read More →

How Many Days in a Month and a Year?

Simple. Remember what we learned in grammar school: “Thirty days has September, April, June and November. All the rest have 31 except February which has 28 except for leap year when it has 29 days.” Fine. But how many days in a year? It’s 365 normally but 366 for leap year. Now the questions get harder. How do we know if it’s leap year? If the year is evenly divisible by 4 it is leap year, otherwise it is not. So 2000/4 =  500.0 and 2013/4 = 503.25. So 2000 is a leap year and 2013 is not.

Hold on a minute. Due to the earth’s rotation around the sun not conforming to even intervals, there is more to the story. Every year which is evenly divisible by 4 is normally a leap year. However, every year evenly divisible by 100 is not a leap year. However, every year evenly divisible by 400 is a leap year after all. So, 1700, 1800, 1900, 2100, and 2200 are not leap years. But 1600, 2000, and 2400 are leap years. Most readers will be sampling their heavenly reward by 2100 but you can still use this information to win a drink in a bar. Read More →

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