Does everyone in the organization need to care about banking with providers who use AFP Service Codes? The simple answer, they should!
Building upon our previous article and the recent announcement of Citibank being the first AFP Service Codes Accredited Provider using the 2018 AFP Service Codes, it’s easy to understand why a treasury professional would want to bank with AFP Accredited Provider or at least banks that utilize AFP Services Codes but why should others in an organization care? This article is to explain the ‘so what?’ to the CFO about why it’s important to use banks who utilize AFP codes.
So Why Should CFOs Care?
Keeping costs in check: Being able to perform a clear apples to apples comparison of all service line items across all banks allows finance and treasury professionals to keep costs in check and thus make informed and strategic decisions for the company. For example, using AFP codes could reveal you have accounts left open that were thought to have been closed and you continue to pay fees for. Or the statements could reveal redundant services, in which case you could request a refund. Errors are a part of life, we all make them even banks make them. Early this year, Wells Fargo confessed and corrected a double-billing error. Did you know bank billing errors account for 7%-10% of monthly billing statements? Finding and correcting these errors quickly helps keep costs in check and the financial operations running smoothly.
Driving decisions with data: Having access to the data provided through AFP Service Codes allows companies to make informed decisions across the organization including HR, supply chain, marketing, etc. For example, using the data from the AFP codes perhaps you notice you are consistently being billed for what appear to be simple administrative errors in one particular region. Additional or improved training or implementing automation to prevent such frivolous fees can greatly reduce these penalties. Properly mapped AFP Codes allow for like services to be aggregated across banks giving you superior visibility into your cash management operations at a much more granulated level. The codes also allow you to compare like services across banks allowing you to establish accountability with your cash management service providers.
Reacting to regulatory changes: Accredited banks are required to maintain their accreditation each year by resubmitting a list of their codes/services that are mapped to an AFP Service Code. This yearly maintenance ensures billing accuracy and standardization. While banking with banks who utilize AFP Service Codes in their billing statements is a great first step, banking with those who are accredited providers ensures up-to-date mapping. AFP Service Codes are updated on average every 5 years.
Reducing risk: Every bank account is a source of risk both internal and external. Using AFP Service Codes is a way to monitor and even reduce that risk. Because each line item is categorized by an assigned code, it’s easy to analyze how much of particular transactions are charged each month. This can bring to light any accidental charges, fraud, or possibly disgruntled employees. Using the AFP codes is one way to keep external risks down.
Using banks that have not been accredited means you will have to develop a system to understand billing per bank and then analyze the data. This can be very time consuming and can lead to very inaccurate assumptions. Do you know how often your bank updates their billing codes/systems? Using banks who implement AFP Service Code in their billing system is the way to control costs, drive decisions with data, react to changes, and reduce risks so you can focus your time on other responsibilities. Redbridge has a team to analyze and software to monitor bank billing statements. To review our bank fee analysis and optimization case studies, click here.
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AFP Service Codes is a copyright of the AFP.