It may be the understatement of the year, but…things have changed. With the Federal Reserve slashing rates to near zero, our entire thought process around treasury has changed.

Not only will this affect how treasury departments invest for the foreseeable future, but also how they allocate cash among their various constituent banking partners. Finally, it highlights the need to review how we conduct business and how we audit that business within treasury

Moving forward – an action plan for treasurers

A well-thought-out action plan will make all the difference when managing treasury during uncertain times. Getting control of your bank fee spend should be on your list of action items and can potentially free up excess cash. So, with our dear ECR credits all but gone, here are some actionable items that you can take ownership of during this calendar year to manage your bank fee spend.

1. Simplify the process

Now more than ever, we need to streamline the process, save time and reduce costs when it comes to our bank fees. Some questions we need to ask include:

  • While AFP codes and their proper alignment between banks are a necessary component of bank fee analysis, you have to ask yourself two questions: Who handles the updating of codes? And, how do I align them between banks? Time is critical, and if you have to do this function yourself, it most likely will not get done. Is your current vendor handling the initial mapping, and then making those changes for you as the bank’s AFP codes evolve? AFP codes need to be harmonized and deconflicted throughout the year – it is not a one and done exercise.
  • If you do not have a straightforward process for communicating audit errors back to your bank, now is the time to put one in place. A monthly report should be sent to your bank, highlighting any errors against contract pricing or a set baseline. This will help maintain the cycle and ensure timely credits are applied back to your account.
  • While spreadsheets serve a purpose (more on that later), how is your data visualization within bank fees? Again, we need a quick review of data in order to identify trends and outliers. Easily constructed charts and graphs can aid in this effort.
  • Once you have data visualization in place, how deep can you go with your data? Can you run reports bank versus bank? Can you break out various product families to review trends and costs in a timely manner? Can you go granular and look at individual line items country by country, bank by bank, and account by account?

2. Make it portable

Along with your ERP, TMS, etc., all treasury functions need to have the option to run in a location-agnostic manner, including bank fee analysis. The current global environment forces treasurers to review their vendors to ensure they are a true SaaS-based solution with back-ups and disaster recovery programs, along with a SOC II Type 2 audit in place. This will help guarantee your treasury operations and monthly cycles are adhered to, regardless of circumstance or location.

3. Get a global view

With the reduction in ECR, cash management fees will affect your bottom-line even more. In the past, you could ignore many of your non-U.S. fees as they would be nominal at best, hidden away in a rolled-up view of global fees with U.S. based ECR credits or allocated out to other cost centers. While ECR does not apply to non-U.S. services, as it drops in the U.S., it only exposes our need to analyze all our bank costs holistically. Make sure your bank fee analysis method or software can easily handle currency conversions and all the line items associated with global AFP codes that can be contained on non-U.S. statements.

Summary

Your cost of doing business with your banking partners has gone up, and this will hit the budget of treasury teams. The lack of ECR offset, combined with the banks’ error rate of 7% to 10%, drives the need for action. As your corporate management team rolls out new cost initiatives, auditing and controlling your bank fees in this new environment can reap quick wins for your treasury team and help to contain and lower costs in these uncertain times.

If you have any questions, please contact your Redbridge advisor. We are always here to help.

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