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Continuing the series on bank relationship management, we transition now to bank account management and structures. Properly designing the cash management structures is vital for operational efficiency and control. Banking structures, for most corporations, will include multiple banks, and several longstanding principles and techniques are being supplemented with new structures. Turmoil in the banking sector has caused a revival for operational backup structures to strengthen the risk management footing of the organization. Additionally, the process and tools of bank account management can look notably different depending upon the organization’s complexity and size. This session will highlight many of the key details from both of these components.
This is an online event
Jason Campbell, Strategic Treasurer
Craig Jeffery, Strategic Treasurer
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Well, welcome everyone to today’s webinar on bank account management and structures the second in a series of webinars on bank fee management. This is Brian from Strategic Treasurer and we’re pleased you could join us as we consider sound principles of bank account management and structures relevant to organizations of varying complexity and size. But before I introduce today’s speakers, I have just a few quick announcements. Zoom offers several different ways for us to interact today. If you would like to post comments or questions viewable by all attendees, please use the chat icon in the toolbar. If you would like to ask your question to just the presenters, please use the q&a icon in the toolbar. You can ask your questions at any time during the presentation, and we’ll try to get to as many as we can. But if we don’t get to your question, someone from our team will gladly follow up with you. There will also be a few polling questions throughout today’s webinar, where you’ll be able to select your response from a list of multiple choices, you will need to click the submit button on the polling questions to have your response recorded. And last, please ensure that your Zoom display name includes both your first and last name, so we’ll know to whom we should send the credits. Our speakers for today are Jason Campbell, business development leader at Strategic Treasurer. And Craig Jeffery, Founder and Managing Partner of Strategic Treasurer. Welcome Jason and Craig. And I’ll now turn the presentation over to you.
Jason Campbell 02:07
Thanks, Brian, we really appreciate it. Always do, you do a wonderful job every time. So I really do appreciate it. And I’m so excited today to have the opportunity to co present this great topic with the great Craig Jeffery. So welcome, everybody, thank you for sharing some of your time for this afternoon. If you’re on the East Coast, or if you’re on the West Coast, you’re almost to that afternoon, on this lovely Wednesday. And for those who are international, wherever you may be, thank you for joining, we really do appreciate it. So this is going to be a great robust 28 minutes of some really good impact information to be able to hopefully jar some good dialogue discussions within your internal circle around your bank account management and preferably like you know, some some just some key takeaways, as you think about your you’re planning, your forecasting or what the things that you have going on around your banking setup as you currently have and what it was gonna look like in the future. So let’s go into our topics of discussion for today. So today, we’re going to talk about some influences and really about increasing the need for sound bank, account management and structures. Going to dive in into enhancing efficiency, both structural and operational, account management, how to optimize uses and fees. And then those key takeaways of hopefully, that through this next 28, 27 minutes that we do have, you’ll have some good things that you can hopefully advance your your goals and your agenda. So let’s get to talk about increasing the need. And really kind of both for the practitioners and for the banks. So as we think about, you know, the increasing need of sound bank account management and structures with a lot of noise that’s been happening for quite some time that we continuously hear. And hopefully that that that noise will start to kind of get a little bit less and less, but we talked about we’ve experienced some bank failures recently, Silicon Valley Bank, Signature, First Republic, you know, other other banks, that potentially could meet that same fate, you know, and how much is available out there for the central banks to help save some of these, you know, these banks, from any potential disasters, those forced mergers, we got Credit Suisse, you know, and potentially what other force mergers may be out there. And then some other concerns to consider. Fed rates, we just recently went with 25 basis points not too long ago, you know. Is it is it really gonna be you know, some pausing going on or is there another rate increase? And there’s a lot of speculation about what’s one is going to do recession, you know, the R word. We’ve been hearing it for quite some time, that geopolitical, you know, what that looks like. And obviously, the regulatory pieces, and when we think about from banking itself and those who are on the line from from the banking industry, you know, the relationships, you know, instilling confidence within your clients and, you know, in ensuring you know, that, you know, that you have their best interests at heart and, you know, ensuring that trying to reinforce what you have going on within your organization and how you’re still able to be there to put those competencies is going to be those are really impactful items to also consider and thinking about ways to drive both efficiency and optimization, and ensuring that their market pricing is actually happening at fair market is across on both sides of the table. Really also to think about operational those increasing needs about growth, and as well as complexity of your organization. And you know, what you have now, and obviously, what your footprint is for the future. So when we think about let’s dive into alluded to that growth and complexity, and really to the drivers of transformation, and on this screen here just kind of paints a little bit of a picture of some things to think about some provoking your thoughts there about, you know, what’s going on, or what’s been going on what’s currently going on, and when they maybe what’s down the road of what’s about to happen. And as you think about your enterprise, really, you know, some some drivers to transformation, think about expansions, acquisitions, maybe there’s been some restructuring that’s been going on product line changes, whether it’s been an increased product lines, maybe a downsizing, even perhaps investing itself, you know, where you’re putting your eggs in your baskets, and then as well as your size of staff, all of those are things to consider from a complexity, what may have been your organizational structure 10, 15, 20 years ago, you know, has it changed? Have you evolved, your banking relationships? Have you evolved within your bank and structure? Those things are going to matter? As you start to think about, you know, are you currently in the right position to be able to drive efficiency, optimization, and revenue streams? You know, have you built a series of growth recently, and maybe, you know, three years ago, your $300 million, and now your $1.8 billion, or whatever your operation is. All those things come to consider that, you know, looking at, you know, how your bank accounts are, you know, and is it set you is the setting you and your organization up for success. And that’s the most important pieces of thinking about being a steward of your business. So, and this leads us into our first polling question, Craig, and I know how well we love polling questions in our webinars. So I’m gonna let you take it from here, sir.
Craig Jeffery 07:19
Yeah, that sounds good. We should have a poll question, How many think that Jason’s up for his annual review with the comments made at the beginning? So that was, that was pretty obvious. Yeah. So there’s two poll questions up compounded in one view frame. If you can’t find it, look in the notes. Brian has some instructions there. Select all that apply. So this is elements of complexity. For the first one, you know, this is moderate plus complexity. You know, any individual category, they’re just we have over 100 bank accounts, 2 billion in annual turnover sales, go ahead and select which ones fit fit the bill. And then the bottom one is we use the following from cash concentration or pooling structure, what are people using to manage the complexity of their bank accounts, and to concentrate funds properly. So go ahead and do that. Then after you’ve done that, if you’re interested in seen the poll results, type, the word “BAM” bank account management, in the webinar chat box, and we’re going to ask for just 100 today, only 100. Go ahead and type that in. So you don’t have to keep saying it. And if you type the word poll, you’re good. But we’re gonna go with BAM, just to keep it focused on topic. So again, just as as people are filling that out, for those on Zoom, it’s good to see your chat and activity. For those on LinkedIn live, I think we’re. Jason, I aren’t looking at the chat and discussions there. But you’re with us in spirit, and glad that you’re connecting through that additional channel. So yeah, so as we go, let’s see what we find out. Jason, as I look at this, yeah, about three tenths, none of the above. And so those would be kind of on the less complex side, it could be simple, could be complex. But you can see we’ve got about the same number over 2 billion in sales. Four out of nine have over 100 bank accounts a quarter have over 10 banks. So depending on you put these together, probably the average audience is complex to hyper complex with a sizable minority that would be a moderate complex to perhaps a little bit of a simpler structure there. As we look down at the bottom, two thirds, two thirds use a cash concentration structure, concentration account, for example, or header account, where your where you’re domiciled and the terms that you use. Physical notional. We can see those numbers in house bank at 21%. I think Brian, maybe we’ll try to combine these from the same webinar we did yesterday at a different time. See how this shakes out. But this looks pretty close to yesterday, Jason, does that seem about right?
Jason Campbell 10:15
Yeah, it’s it’s amazing. Yeah, it’s actually really, really close. And I think you when you’re talking about complexity that really hits on that previous slide, right. When you pick about that, that hyper complex organizational structures, then it seems like a good time to really kind of revisit that, their banking structure as a whole, and, and seeing if that’s there sitting in the right spot still.
Craig Jeffery 10:36
I’m told we need 23 more responses with the word bam, in the chat box to fit our number. But yeah, so we’ll pass the poll question onto optimizing bank structure. So it says that shows up on your screen, the first area, why do you optimize your banking structure? Well, for good cash management principles, one of those is visibility. Where’s my where’s my cash? What bank? What accounts? What country? What currencies? What entities do I have them in? And then beyond that, what’s in the bank accounts? What about the investment and debt side? And this, how we optimize restructures. Concentrating to certain banks who can perform that function or having all of this information reported back, so you have full visibility, those are no longer nice to have. It’s, it’s a, it’s a commercial reasonable process to have visibility to all your accounts on a daily basis. That’s a cost of doing business. Now, how you do that, and how you do that efficiently is another effective decision, but it’s something that should be done. And as we look at optimizing bank structures, there can be different reasons, you know, managing financial risk. This could be how money moves in and out of your bank accounts. Do you have all these payment flows documented? And usually people answer that yes, or almost yes. And what we really, really find out is, you understand and know the major flows, but there’s other flows that may not be aware of. We usually find it’s about 50 or 60%, to 100%, more than people, you know, notate when they first get into a project to look at that. And that’s pretty significant because how can you control all of your flows and cash management activity if you don’t know where the flows are? How do you protect what you don’t know or don’t see, or it’s something you could have thought about, but it’s not on the radar. It’s off to the side that has to be looked for. You know, looking at the upper right hand side, we see connectivity. This idea if I need visibility, and I need to be able to move funds. And I need to be able to do that for good cash management purposes. But also for good disaster recovery and contingency planning. I maybe have to move from a bank who’s in trouble, or I don’t want to keep beyond above a certain amount and particular bank, particularly when the news is bad. Do I have the ability to move that move that quickly? And to see it? And to be able to respond? Do I get timely information or I’m living in a world that acts not much differently than if it was 1980. For those of you who were around in 1980, things were a lot slower. And for those that weren’t around, things were a lot slower. And this idea of how do we concentrate funds efficiently are very important across the board, but we think about bank structures as well, as we contemplate what we’re doing, this optimize know your customer, is an issue. This is one of the biggest pains that companies identify, and the banks are identify. They are in agreement with that. Why do I have to send utility bills, like I have to send my real passport in? It certainly becomes a challenge for for companies. And so this idea of how do we optimize what goes on with setting up accounts, manage those, and controlling those has implications for for KYC. But also things like foreign bank account reporting in the US, the new beneficial ownership information that has to be reported if you have beneficial ownership interest in a company. So there’s new requirements and new regulations, from the setup to the management of that activity. And I’ll leave the others off for a moment for the rest of this discussion. But there’s a number of reasons why we focus on different areas of the banking structure. So let’s let’s flip over to linear to global. Now. You know, if you have children sometimes you learn about linear learners global learners. You remember that from college, perhaps, what’s a linear thinker, a global thinker. This is not meant to be, put one against the other, both are really important in the thinking end of things. But for purposes here is linear as things are put in order or you incrementally add stuff, always optimize it for the individual add. Whereas global is looking at the picture, as a whole. And this is, the challenge for many organizations is they’ve come from a linear world where things get added slowly over time. You don’t start with a blank sheet of paper, you start with whatever’s there. And then someone else’s sheet of paper comes in from the companies, you’ve acquired businesses you’ve taken over. And over time, that becomes complex. And so this idea of global is what’s what’s efficient if you’re starting off today? So what’s the better approach? We think about things like the banking structure. Is it unintegrated? You have certain acquisitions you’ve done and then there’s this manual process where you’re moving funds to get it to flow and optimize your use of cash, or are using modern cash management principles, tools, technology and services offered by your bank, or by other providers. Maybe you’ve heard things about virtual accounts, or different types of pooling, physical pooling with the ZBA structure, etc. So there’s different options. The other thing is, as we move from linear to global, we know accounting can be very fragmented. Some of it’s done by, you know, AP, or AR another area, some stuff by treasury. But what is done from a systematic perspective? Is treasury the owner of cash and does that mean, all cash accounting is controlled by treasury? The cash book of record might be the treasury system you’re using. And how do you record those entries? Is it done manually? Do you use rules? Do you use logic-based rules? Do you use machine learning enhance logic-based rules? Things that help a good controlled process go on. So that fits into the overall look of, how do I set up my cash management structure, my bank account structure? It should be set up for treasury purposes with treasury at the core and the root of that. It should not be set up for accounting purposes. Designed first for accounting firms, but what that means is it should be set up for treasury and cash management purposes and efficiency that contemplates some of the other needs, like accounting, like a different business areas to support their needs. So it has to contemplate those but it should first be set up to address treasury’s needs. The other the other element I want to talk about on this particular slide is relationship management. Now, you know, relationship management with banks is is vital. Why is it vital? For many organizations, banks provide significant capital, they provide advice, they provide institutional support, over time, over years, decades, maybe even centuries. And this, these relationships matter. And they’re matter, they matter to the organization more than any one person at a company to one person at a bank. It’s a relationship management can be kind of informal, it’s in my head, or it’s in individual handwritten notes and folders that I have. Or it’s maintained properly, at an institutional level so that whether you move in or out or someone else moves in or out that institutional relationship, this document is managed and nourished. That’s why I use the word nourish, but I think you know what I mean. But your bankers provide, do call notes every time they call you. Every time they visit you they have here’s what we talked about, it was discussed, here’s what was decided, and you follow up, they’re intentional about looking at you as a company. And as a company, you should be documenting calls with your with your bankers, particularly if your top tier bankers. What’s being said? What are you saying? What are you promising? What are you asking? What are they delivering? So that there’s institutional knowledge and awareness of that. Now this progression is, there’s there’s quite a bit more on this on this slide that we can go over in the hour version of this webinar, but we have a half hour version. So I’m gonna let you see the slides and using your creativity, you can you can fill that out. But let’s go to our second poll question. Two question, plans. We have the following. So the top three are pick one of those. You could select all but please only select one of the top three and then of the bottom three, select one of those as well. Like the ones about bank relationship plan. And the bottom three are about banking contingency plan relevant for today. The last one is you’d like information on our two educational podcast channels, Treasury Update Podcast and the Open Treasury Podcast. So yes, we’ll make sure we send the link for that. No, and we will pester you less. While you’re answering those and hitting submit, if you look in the webinar chat box, you can follow CTMfile or Strategic Treasurer. Please do. That makes our marketing team happy. And Jason and I would both like to connect with you on LinkedIn as well. So just submit it there, and we’ll connect. If you’ve already connected, awesome. And if not, let’s let’s do that. There’s a moment to do it. And I think Brian’s letting me know that we need about four more people to type the word BAM in the chat box. So we send out all the responses. All the poll questions, so we’re covered. Here the plans, normal bank relationship plan, this is a good group 47% That’s that’s awesome. Informal, you know, it’s in somebody’s head, and 70, 80, 92% of those that responded, pick one of those three, looks like 72% picked the formal contingency plan informal. You know, the other question is how, how formal? How many, how much more formal has had those banking contingency plans gotten in the last few months? You know, 2008 2009 that picked up and then became forgotten, like those who rebuild on the floodplains. When there’s not one of those periods of stability, we don’t do that. When there’s periods of change, that shifts. 20% don’t have it. It’s one 30% have an informal bank contingency plan. That’s something we’d certainly recommend. So 61% would like information on the podcast channels. You’re my heroes. And those that don’t, yeah, that’s what it is. All right. So we’ll, we’ll keep going. I think, Jason, I’m on this one, too. So it’s bank account management. So we look at this. This chart, we’ve got five different areas, I’m gonna touch on a few of them. You know, we look at this topic, the whole webinar series is called bank fees, it’s part of the Bank Fee Management Series. But I’d say bank fees are part of bank account management or partner relationship management. So just because it’s a series, you can pick it at the top level or lower level, we just pick the series of the lower level. But here we’re pulling out. So relationships, we spoke about those. This idea of how important are your banks? How do you stay important to your banks, over time, and institutionally? You have a plan, they have honest communication, you calculate what your what you think your value is to them. How are you doing up what you can pay them, it’s your credit, with your operational activity, card, any other services, to make sure you’re compensating your banks properly. And so that’s the share of wallet. You also want to make sure you’re paying the right, the right fees within that, you know, a more appropriate range. And Jason will talk to you about that as well. This is the value of spending time thinking through what relationships are important, and how will you be important to your banks. Your banks look at you and they do calculations such as RAROC, or risk adjusted return on capital, to say, based on your level of risk, are they getting the return that makes sense? They have to be stewards of their balance sheet. And they look at you in that way. And you should look at your banks in terms of are you being important to them, that’s important institutionally. I’ll jump over to the setting up critical wires and transfers. You know, in in times of stress, want to make sure we have a backup method for moving funds. Do you use a portal? Do you leverage some network, or network like Swift? Do you set up drawdown transfer so you have at least a couple of ways to move funds in and out of banks as a as a normal contingency or as normal backup? That should be at least part of your contingency planning with banks. From the policy compliance side that gets people angry. It’s frustrating. So I will get you to frustrated, but know your customer is a significant challenge. Bank account management is what we’re talking about. Foreign bank account recording is one of those challenging items. Many companies create a different definition for signers than FinCEN has. FinCEN signer is what you and I would consider a signer. But it’s also someone who has access to an electronic system, such as a portal, that by themselves or in conjunction with another person can move or approve the movement of funds. And those are signers under FBAR. And some people say no, those aren’t signers because you’re not listed as a signer of the bank, yet they can move funds. So go with the actual definition that FinCEN uses and win the argument of the party. Beneficial ownership information, there’s some new requirements coming on January 1, 2024, that you have to report by then. I believe the other day I mentioned it reporting by the tax date in the US of April 15. It is, recording has to begin by January 1, 2024 for existing accounts for existing entities. Now, there’s a lot of information that we’ll have other webinars. Brian will make the pitch for attending another webinar that. I’m gonna leave off on this topic, just for the sake of time, turn it over to Brian, Brian, I’ll turn it over to Jason instead, to talking about some fees.
Jason Campbell 25:47
Brian, Jason, we just respond. No worries. So you know, what would be a bank fee management webinar without talking about fees, right? So Craig gave us a ton of information on those things. And you know, one thing that I think about my day to day life is I’m not always looking for the cheapest way of of spending, I look at the fair way of spending, right. And I think, you know, it’s from stewards of good businesses, you want to look and say, Hey, how do I have good relationships with on both sides of the table, having fair market prices, conversations, and I think that’s fair to have. Right? So with rising deposit costs, you know, it’s expected that bank fees will be increasing, and knowing where that route is going, right. And that’s all about relationships and talking with your, your banking partners. You know, there’s more attractive investment options with increased rates such as earnings credit rating, money market accounts, etc. There’s, there’s a plethora of options there. So it’s knowing exactly, you know, hey, we’re going to have the best step forward, ensuring that we’re maximizing the opportunities. And with these increasing, again, you’re wondering looking at, are you optimizing your services within your current baking structure, and services? And these are three big questions. And they’re questions that may, hey, maybe you have it all, you know, under your thumb, and you have a really good process in place, but maybe you just need some help and assistance, there are services out there like Strategic Treasurer, that may be able to help you understand a little bit more about how to manage your fees more effectively, or just simple help, like, hey, I need I need a game plan, I need assessment, there are organizations such as Strategic Treasurer that we can absolutely assist you, and we’d be more than happy to do that. And then it rolls into the next slide. So some key takeaways, as we think about as we start to round this, this session out here. The roadmapping. Roadmapping is a very important and critical piece. Right. And it’s having a plan, a structure, and as we’ve talked about the polling, you know, do you have a contingency plan or, or maybe you have a bank account management plan, all those types of things are important, knowing exactly where you are, or where have you been, where you are, and where you’re trying to get to, and think about in those environments, the positions, and obviously, the destinations. And then as we just talked about managing fees, you know, when we think about management fees, benchmarking was last time you benchmark your fees, or maybe you have and you’re in a great spot. That’s awesome. And maybe it’s just time to kind of revisit and look at and see if there’s opportunity there. ECR rates are on the rise, are you in the best position to maximize and take advantage of those opportunities that are out there? And then really, that relationship perspective, is having those whether you’re having conversations with your relationship banker, you know, whether that’s monthly, maybe some semi annual or annual, but you have something in place, and it was great to see that the vast majority of those who answered the poll had a formalized plan in place already, which is great. And for those who you know, who don’t have that, and, you know, maybe it’s a great time to kind of revisit it and really establish a more formal approach to your banking relationship. Craig, what do you think about that?
Craig Jeffery 28:51
I think that’s great. On the on the increase the following: visibility, liquidity, connectivity and efficiency. This is really, What’s commercially reasonable?, and move to that. I think that’s really what I want to leave you with, you should be able to see all your accounts every day, sometimes current day, but certainly on a priority basis. The last point here on the four pillars is the banking structure contingency plans. Everyone will pay attention because of what’s happened. You have a primary and secondary bank. Make sure you get the secondary bank in place so that you can transfer as needed, even if it’s a 80/20 shift for companies of any significant size, and have a plan for being able to move funds quickly. Do it now. Set it up. If you have any questions, let us now. Turn it over to you, Brian.
Well, thank you, everyone for joining us today. The CTP credits, today’s webinar slides, and the recording of today’s webinar will be sent to you within five business days. And for more on bank account compliance, specifically FBAR and BOI, that is beneficial ownership information, be sure to register for our webinar on this topic by clicking the link in the chat box. Thank you and we hope you have a good rest of the day.