Evaluate and monitor the cost of your banking services!
The treasurer’s role: buyer, negotiator and cost controller for banking services
At the Group level, the overall cost of banking services can become quite substantial if not carefully monitored. This responsibility falls to the treasurer, who must remain vigilant and acquire the right tools to evaluate this cost, reduce it, and monitor whether banks are correctly applying the negotiated conditions
These services include administrative management of bank accounts; making statements and payment methods available; payment order processing (cash management); issuing and managing export bonds or guarantees (trade finance); or services with greater added value, like solutions for securing payment methods against fraud…
TMS: an indispensable tool for monitoring and controlling bank fees & commissions
What treasurer has never had an account manager kick off an annual review with those dreadful words: “I’m not making enough money with you”?
At this point, the treasurer has three options: pull out the tissue box, threaten to close all their accounts (at the risk of having to actually follow through on the threat!), or discuss the situation like a real partner and review the figures together with a detailed look at the bank/company operating account. The unknown factor for the treasurer here is the bank’s processing costs.
The last of the above options (and the most reasonable one) assumes that both parties have a complete and detailed view of the bank fees and commissions invoiced for each type of operation, as well as a record of the volumes of operations that generated those fees (number of operations processed and total amounts). The goal here is to be able to benchmark the cost per operation from one bank to the next and to ensure that all commitments are being met. After all, negotiation of fees is generally backed up by a commitment from the treasurer to entrust the bank with a certain volume or certain variety of operations over a given period (e.g. a certain number of international transfers for the year, or a minimum average total of receipts via bank cards, etc.).
Without a TMS, this process can become a real nightmare for treasurers.
Even a quick glance at a bank’s list of “general pricing conditions” reveals the wide range of different fees and commissions that any good treasurer has to negotiate when establishing a relationship with a new bank: package rates for each type of operation, percentages of the amount of each operation (sometimes regressive by tranche), or a combination of the two…
So the treasurer must track two things in parallel: the cumulative fee amount for each type of operation, and the volume and amounts of the underlying operations. There are two purposes to this: to check that banks are correctly applying the negotiated conditions, and to ensure that the company has respected its volume commitments, during the treasurer’s annual meetings with their account manager!
Monitoring and identifying fees is a complex process: banks continuously withdraw many of small charges from bank accounts, and the charges are sometimes “hidden” by being incorporated into the main payment amount. Another difficulty is that the fees may be coded differently for the same type of fee from one bank to the next, and coded identically within a given bank for different types of fees!
An initiative is under way to establish the “BSB (Bank Services Billing)” standard at the international level, in order to minimise these difficulties by standardising bank fee codes to make them more transparent and comparable:
BSB (Bank Services Billing) for transparency in bank fees
This service, developed in the United States by the TWIST group (Transaction Workflow Innovation Standards Team), seeks to achieve transparency in the way banks bill the fees and commissions they withdraw. Establishing standard definition codes makes fees easier to understand, easier to monitor, and easier to compare between banks. Each bank has its own billing system, with its own codes based on the products and services it offers. In order for a business to understand and (more importantly) compare its banking partners’ products and services, it is essential that the business have a comparison table for those codes. Companies want to know how much they are spending on banking products and services – and, of course, whether those charges are justified.
Monitoring the underlying operations behind the fees is also complicated: Despite the long-time availability of a system of interbank codes established by the CFONB (the Comité Français d’Organisation et de Normalisation Bancaires, or French Committee for Banking Organisation and Standardisation) to distinguish different types of operations, banks do not always comply with these codes. When reviewing an account statement, it then becomes a challenge to distinguish a cash flow transfer from a domestic or international third-party transfer… even though the fees negotiated for those transfers are different.
What added value does ACA’s THÉTYS TMS provide?
“THÉTYS Tréso” allows you to automatically aggregate and monitor the amounts of the bank fees and commissions that your banks apply to all of your different operations:
- by automatically generating projected fees, which you can then reconcile with the fees charged by the banks, or
- by generating “Fee Tracking Summary Statements” that let you visualise the following key indicators for a given period (e.g. monthly), in an aggregated way, for each bank and operation type:
- the theoretical amount of fees to be billed per bank and per type of fee
- the basis amounts and number of operations underlying these fees
- the actual amount of fees withdrawn per bank and per type of fee
- a precise simulation of your interest scales, to be reconciled with those sent by your banks.
When you channel your payment files through the “THÉTYS Payments” platform, THÉTYS TRÉSO provides you with all the statistics you need to monitor the operations that generate fees (basis amounts, number, type of operations): For example: the number of transfers contained in your payment files and the transfer types (cash flow, international, SEPA, etc.), which are determined by the specific format of each file.
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