For your company to make informed decisions about selecting a bank, negotiating credit and managing cash, you must first understand how a bank operates.

Most banking relationships are characterized by an information imbalance that puts the customer at a disadvantage. To obtain credit, a company must first demonstrate its ability to pay back whatever it borrows. This means providing the bank at a minimum with income, cash flow and balance sheet statements and other detailed operational information.

The scrutiny is on the company that's asking for the money, not the institution that's lending it.  As with any other business negotiation, the party that controls the flow of information is likely to get the better end of the deal.  

How much does your company actually know about its current banking partners? 

• What are their priorities? How do they make their money?
• What drives their capital costs?
• How do banks rate their customers?  
  
• What is the "wallet"?  
• What is "fee creep"?
• Does it ever make sense to work with a non-banking entity for your credit needs? If so, are there special risks that go along with that?
  
• Are national banks different from regional banks? Should you be working with bank employees at the bank's headquarter, a regional office or a small local branch?
  
• Just how do you select the right bank for your company? 

Many companies see banking as a fixed operational cost. They don't look at their bank as a supplier, even though that's basically what a bank is. The bank just happens to be in the business of supplying money.  Companies that regularly negotiate with their other suppliers can also negotiate with their banks. How can your company leverage its own financial position? Could you obtain lower fees, or get more banks to compete for your business? 

The financial world is rapidly changing.

The global crisis of 2008 has led to new regulations that are changing the way banks work with their customers. Most companies know about Dodd-Frank and the Volcker Rule. But few know about Basel III, effective beginning in January, 2015, which may cause some banks to either drop some customers, or significantly limit their access to credit. 

• Could new government regulations affect your company's access to financial resources or make them more expensive?
• How can your company make adjustments before these changes create a credit shortfall?
  

A regular assessment of your banking operations can lead to changes that improve your company's profitability and financial stability. A bank relationship analysis takes all the various external and internal factors into consideration to provide your company with the information it needs to make the most effective banking decisions.