Considerations in Bank Selection
March 26, 2009 – 4:17 amBank contact has traditionally been through the treasurer, whose responsibilities include the safeguarding of the cash and near-cash assets of the company. In recent years, access has been extended through other business functions, as banks have broadened their product offerings. Too often, treasury staff remains unaware of the resulting dilution of its responsibility.
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Purchasing and accounts payable is often the entry for EDI, e-commerce, purchasing cards, and disbursement outsourcing (comprehensive payables).
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The payroll or human resources department may invite discussions concerning the direct deposit of payroll and payroll ATM cards.
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The investment or real estate department may be interested in such specialized services as stock loan, custody, and escrow or tax services.
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Systems or information technology (IT) often initiates discussions about any of the more technology-oriented bank services.
Given the current credit environment, it is essential that treasury be the gatekeeper for all financial institution contact. This will assure that an attractive package of profitable business is assembled for the relationship banks and to prevent unauthorized negotiations or contracting between the company and other banks.
The RFI
In establishing a comprehensive bank relationship strategy, an initial step used by many companies is to issue a request-for-information (RFI) letter to candidate financial institutions. The RFI is used to determine which banks are qualified and interested in providing banking services. A list of potential bank bidders can be developed from previous calling efforts; contacts at conferences and meetings; and referrals from accountants, attorneys, and business colleagues. (Note: The procedures described throughout this chapter may be applied to the selection of nonbank vendors; see, for example, the discussion of treasury information systems in Chapter 6).
The RFI letter should explain the purpose and intention of the company in establishing a long-term banking relationship(s) for credit and cash management services. Basic descriptive and financial data is provided, including contact names, business locations, credit requirements, volumes of current services, technology used in financial transactions, and other relevant information. The letter should then solicit indications of interest in bidding on the services required by the company.
Taken From : Essentials of Managing Corporate Cash
