People don’t have the time they used to, so everyone is seeking a one-stop-shop answer for their needs. That goes for companies, too. Why simply hold accounts at a bank when you could also get advice on succession planning or taxes or treasury management services?
While many banks may present themselves as total “financial advisers,” it ultimately comes down to experience and connections, says Mitchell Belon, regional president of MB Financial Bank in Chicago.
Smart Business spoke with Belon about what makes a bank a good financial adviser.
What attributes should a company look for when selecting a bank as its financial adviser?
It should look for a bank that focuses on commercial banking as its core business. A good commercial bank will have professionals that have experience with various types of companies. In addition, veteran business bankers may have experienced changing economic cycles and have seen how they affect companies and their management.
A banker should also serve as a company’s trusted financial adviser. He or she should have a working relationship with both the company’s attorney and accountant. Bankers can set themselves apart from the competition by spending time thinking about the company and where the owners want it to go. A banker should recommend proper debt facilities and structures, depending on the company’s sales cycle, cash flow and asset life span.
A good relationship manager wants to build a comprehensive relationship with the company and its owner, and businesses need to view their financial services in their entirety. If a company is solely focused on the lowest-cost alternative, it will suffer in the long run. It will bounce from bank to bank and never really establish a solid relationship of mutual trust, confidence and respect.
When you consider all of the time and effort it takes to make a change, you’ll see that the costs often outweigh the sometimes very small improvement that may be picked up in an interest rate.
What is a treasury management plan?
A comprehensive treasury management plan will address each facet of the cash cycle. This would encompass cash disbursements, the collections of cash, fraud prevention and the movement of funds within the bank between accounts and/or loans. A bank’s goal should be to set up a system that runs itself, allowing the company to do what it does to produce profits.
Cash disbursements can take the form of checks, ACH transactions and wire transfers. The number of ACH or electronic payments is growing rapidly because it’s safer, cheaper, faster and easier than mailing checks. Today, this can all be easily controlled and managed by the business. Paying vendors in this manner is becoming common, and operating an in-house payroll that offers direct deposit to employees has become quite simple. Forge-proof checks can be purchased, and reconcilement services that monitor incoming checks issued by a company on a daily basis all but eliminate the chance for check fraud.
Cash collections are what keep the company’s engine running. The goal is to make it convenient and safe for customers to pay — as quickly as possible. A company can outsource the grunt work of opening payments and preparing deposits to the bank through the use of a ‘lockbox’ service. Also, a company can allow customers to pay smaller invoices by credit card over the phone or Internet with merchant credit card processing. A company can also collect payments electronically from customers through the use of ACH services. If a company has multiple locations in different cities, funds can be ‘concentrated’ or moved in easily from other company bank accounts to a central operating account.
Within the bank, many companies take advantage of online account access, which makes a wide variety of monitoring and information reporting available at your fingertips. Any loan or interest payment can be set up for automatic payment on the due date. Excess cash can be ‘swept’ automatically into an investment account at the end of each business day. Funds can also be swept between the main checking account and a line of credit.
What is succession planning?
Succession planning allows for a smooth transition of an owner out of the business when he or she is ready. This may be to the next generation in a family, to a purchase from an outside company or through an employee buyout. At MB Financial Bank, we have a team in our Wealth Management group that works in conjunction with the company’s attorney and accountant. They devise an integrated approach that considers the financial, legal and accounting aspects of the move.
MITCHELL BELON is regional president of MB Financial Bank in Chicago. Reach him at (630) 797-9047 or email@example.com.