How do you know you are getting the best rates for the fees you are paying to your banks? You could compare what you have paid in the past or what you pay to other banks. However, are those truly accurate benchmarks? Each banking relationship varies with the multitude of services provided by each bank. The rates you pay in fees could vary just as much as the number of services you use at each bank. Utilize the below tips for smooth bank fee negotiations.
You Do Not Get What You Do Not Ask For.
For many finance and treasury professionals, a primary objective is obtaining lower fees. To this point, you should not be afraid to ask for a fee reduction from your banking partner. You may not want to pursue this option immediately, however, it can yield favorable results, especially after a relationship that has developed over the years.
What Else Do You Have to Offer the Banks?
Having something extra to bring to the table can help sweeten a deal with your bank, especially since they are entering a risk when taking on your business. When your company can deliver ancillary business and bring additional services, the bank could value your organization more and have greater flexibility to make a better deal.
Put Yourself in Their Shoes.
Empathy can be a valuable tool when it comes to negotiations by placing yourself in the shoes of the individual sitting across the table and understanding the role of their organization. Understanding factors such as the bank’s capital and liquidity constraints, global profitability, and core capabilities provides leverage and insight into finding a deal.
Work for a Long-Term Partnership.
Banks generally aim to price fees in relation to the value that their institution provides, and there are situations where you should reasonably expect to be charged higher fees. While you may not always agree with their positions, successful negotiations depend upon mutual respect as business partners rather than two parties strictly entering an arrangement. Planning for the long-term and successfully understanding the bank’s long-term goals will allow negotiations to flourish as a partnership where two parties share a common objective rather than a zero-sum competition.
The Best Offer is Rarely the First Offer.
Standing your ground is a necessary negotiation skill, especially for obtaining the best rates. Respectfully push back against your banking partners when a point is not understood or after you have presented compelling evidence for why your desired rates should be met. To maintain respect while avoiding biting at the first offer, state that you and your team will need some time to review the proposed fee structure.
Know What You Are Working With and Continue to Review Data.
Successful negotiations require doing your homework to achieve your desired results. Prepare for negotiations by reviewing and auditing your current fees to create a benchmark and to track fee structures over time. Seek accountability and visibility into your bank’s billing practices by asking for Bank Services Billing (BSB) reports to standardize your data. Even after negotiations end, continue to review and analyze your data and let the banks know of any discrepancies.
Five-Year Rule
Monthly reviews of bank fee statements are a best practice but how long should you go before you complete a comprehensive review of all bank fee statements across all your banks? In the short answer, every five years. Changes occur in your banking relationships, employees, billing systems, and technology within those five years which is why reviewing these relationships and partnerships should occur every five years.