Review of Pricing
March 29, 2009 – 4:37 amAlthough pricing has long been the consideration in selecting a domestic cash management bank, recent experience has seen a decline in its importance.
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Maturity of the product cycle. Because many cash management products are in the mature phase of the product cycle, there is minimal variation in the price charged by most banks. Furthermore, information on pricing is published in the Phoenix-Hecht Blue Book of Pricing (www.phoenixhecht.com/), making pricing data fairly widely available to all interested parties.
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Unbundling. Banks have unbundled pricing for cash management, making line-by-line comparisons meaningless. Some banks charge for each specific service, while others include the service in the fee for the underlying product. For example, controlled disbursing may include positive pay or may be priced separately.
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Quality. It is generally recognized that any quality or service problems relating to a specific cash management product can cost many times the price per unit of the service. As a result, the savings of a few cents per item is not important when compared to the cost to resolve an error, a communication or transmission problem, or other bank failures.
In the Real World: Specific Terms Offered by Lenders
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Credit facilities are normally not bid through an RFP, but are simply requested of the financial institution based on past and projected financial statements, a business plan, booked and anticipated sales, and other relevant data. Specific terms offered by lenders include the following:
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Amount of the loan
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Maturity or duration of the loan
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Interest rate, usually the prime rate or LIBOR plus or minus one or more percent
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Payment schedule, usually monthly
Taken From : Essentials of Managing Corporate Cash
