We have discussed the stages of your banking relationships and tips for a successful RFP but what does an effective RFP process look like? There are steps in the process every company should progress through for a successful RFP process. Below we detail those steps along with a few insider tips from Redbridge experts who have worked through countless RFPs with our clients.

Who to Involve

Major changes can result after completing the RFP process. Securing approval from management, stakeholders, and your CFO and/or Treasurer prior to beginning the process is critical to the success. Key people from internal and external processes that could be impacted by new or changed banking relationships should be involved in the RFP process. These key people may include accounting, procurement, and supply chain management team members as well as your IT and ERP providers. Once you have the proper team members on board, you will need to define the timetable and decision-making process along with prioritizing key minimum requirements.

Who to Invite

You could narrow down your pool of potential candidates to only existing providers and lenders. However, we suggest inviting at least one third-party player, specifically a fintech player, since they could have emerging technologies not always available in banks but could be very price competitive.

Develop Your RFP

Determine the Goals

Assess the banking services you need and the requirements a banking partner would have to meet to bring value to your organization. Putting the services in priority order will help during the evaluation stage of the process. List other key requirements to look for including integration with an existing ERP system, short processing times, and good customer service. Decide which benchmarks you will use to compare banks and gather market data so you can compare fees.

Formulate the Questions

You can use a pre-existing template or develop customized questions per your organization’s needs. Using AFP standard service codes will help you compare similar services across banks and are meant to standardize the services billed on your account statements. We strongly encourage using AFP codes not only for the RFP process but also during your monthly account analysis statement audits.

In your pricing templates, be fair and transparent in your estimates. You can calculate the volume for each product or service based on historical data and realistic projections. Creating a pricing template can be challenging because banks do not always use accurate service codes, or they might group different products into a larger family under a single code.

Formulate your questions clearly and create a scorecard so you can assess the qualitative offer of potential banking partners. Your scorecard should reflect your goals and priorities.

Evaluate the Proposals

Evaluate both quantitative and qualitative responses. Keep in mind that the initial proforma pricing can be different from the final fee schedule. You must ask the banks for a proforma pricing schedule with bank names for each service line and the logic they use to map those service lines to the AFP codes within your template. From here, you need to carefully review all the service codes and fees included in the initial response to your RFP. You should also use your Earnings Credit Rate (ECR) in the negotiations. A good ECR can offset higher fees depending on what your typical balance is.

Comparing fees between banks and market benchmarks is important, but you should not forget to assess the quality of services and relationship. The initial presentation of a potential banking partner can give you an idea of whether or not the bank will offer good customer service and cares about building a long-term relationship with your organization.

Go For Round Two

After the first round, you should notice a few front runners and possibly be able to eliminate a few others.  Going for a second round is typical. During the second round, you will ask for best and final pricing. You or your RFP consultant should be able to calculate the approximate profits that your business generates for any particular bank through a RAROC [Risk Adjusted Return on Capital] analysis of that bank. This can be instrumental in the negotiation process.

Check the Fine Print

Go over the agreement carefully and compare the services and fees to what was negotiated. Banks will typically guarantee fees and ECR for three to five years. Monitor your statements to make sure the bank is billing you correctly, and look for changes and errors. You as the customer assume the responsibility to ensure pricing meets final negotiations and savings are realized!

Putting together an RFP and evaluating potential banking partners is a time-consuming process. Redbridge can assist you with this daunting task. Contact us today to start the conversation.

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