July 2008

IS IT TIME TO SPLIT FROM YOUR BANK OR TO CEMENT A LONG-TERM RELATIONSHIP?

Given the current economic climate and with all the major banks offering incentives for businesses to switch to a "better" deal many directors may be increasingly tempted to switch banks. Steve Mitchell, Director of Acumen Accountants and Advisors discusses whether now is the right time to consider a move from your current bank?

What You Should Expect From the Relationship?

The old adage "you get what you pay for" applies to most service industries, including the world of banking. Sure the level of bank charges you pay is an important factor but a major factor is also the level of customer care and personal service that your bank provides. The key questions you should be asking are:

1. Does my bank provide a dedicated Relationship Manager?
2. If so, can I pick up the phone to my Relationship Manager if I need something?
3. Does the bank understand my business and how it works and its cash flow requirements?
4. Does the bank understand my plans for the business and when I might require additional financing for growth?
5. Does my Relationship Manager meet with me regularly?

All major banks promote their ability to look after you, but does your bank pass the acid test? Switching banks to save on banking charges may be short term thinking if the new bank doesn’t provide the level of personal service that your business demands.

The Bank's Expectations of You

Another adage is "it takes two to tango" - you should not underplay your own role in your relationship with your bank. Your relationship with your bank, like your relationship with your accountant and other professional advisors, should be like a partnership.

Understand how you can get the most out of your bank. Familiarise yourself with the main types of finance. Relationship managers are a first point of contact and are unlikely to have all the technical knowledge of all the services that the bank may offer. However ask your relationship manager and they should be able to assist by introducing you to a colleague who can help. Know what you want and you have a better chance of getting it.

What about the "Credit Crunch?"

A credit crunch is a sudden reduction in the availability of loans or "credit" or a sudden increase in the cost of obtaining a loan from the banks.

During a "crunch", having a bank manager who knows the business trading history and can see you through hard times is vital. Banks are risk averse by nature, even more so during a crunch.

Banking has become increasingly automated over the past decade, however thankfully we have not reached the time yet where a machine makes the decisions. Like the Roman Emperor deciding the fate of the failed gladiator by "thumbs up" or "thumbs down", at the end of the day, your Bank Manager is a person and having a good relationship with that person will give you a better chance of success.