You’ve probably met with your executive team and members of your staff to devise ways to weather this economic cycle on sound financial footing. But you may have forgotten to invite a key player to the table: your banker.
Whether you’re seeing red or thriving during this volatile time, it’s always helpful to ask for input from an outsider. Now is the time you should be thinking beyond just the products your bank offers and see your banker in the role that he or she aspires to be your trusted adviser.
“Banks can be a sounding board and trusted adviser to help commercial customers understand and be aware of relevant trends that can impact their business,” says Alan Zang, senior vice president, middle market executive, KeyBank’s Cleveland district. “In volatile times, information becomes more valuable.”
Many businesses don’t think to communicate with their bank on a regular basis, which means missing out on a valuable, free resource, according to industry experts. Think of your bank for ideas and solutions for efficiency, especially now when you’re probably looking for answers.
To take advantage of your bank’s true role as a consultant, you must start by forming and maintaining a strong relationship around trust and communication.Introduce yourself and your business
The first step in using your banker as an adviser is allowing time for him or her to get to know you and your business. Even if you’ve been partners for decades, invite your banker to your office or place of operation for a meeting.
“It’s all tied to really connecting the two organizations at a number of levels,” Nancy Huber, market president, Fifth Third Bank Northeastern Ohio, says about building the relationship. “When we bring a new customer on, I will very often be asked to go out and meet my counterpart in the new business, and we’ll bring out folks from all over the bank so that you’ve got many touch points, not just a single person.”
While it’s important for the bank to learn about your operations, over time, it’s necessary for you to return the favor. A good relationship banker will introduce you to managers and key decision-makers in the bank, but if the introductions aren’t offered, take the initiative and ask for a meeting. The more people you know at the bank, the more likely your company will become a household name, the more likely you’ll know who makes the decisions and how they’re made and the more likely a smooth transition will occur if your contact leaves or is promoted.
“I sense in the current environment, it’s really important for companies to keep in mind, especially if they feel like they’re facing challenges in terms of financial situations, (it’s) important for bank clients to know the decision-makers at their bank,” says Jerry Kelsheimer, president of the Greater Cleveland region, The Huntington National Bank.
Once the initial contacts are made, work to maintain those relationships with open and candid communication. Ask your banker how often he or she wants to hear from you. Is it once a month or once a quarter?
If issues arise in the meantime, don’t be afraid or intimidated to call your banker. One thing all bankers will tell you is that they hate surprises both good and bad. The more they understand your financials, strategic plan and any changes in the company’s overall operations, the better they’ll be able to provide products and solutions to keep you on the right track.Use your bank for regular counsel
Like your lawyer or accountant, use your banker as a true consultant. Whether you’re trying to stay afloat or even rapidly growing, your bank can help in navigating through this economic downturn and in planning for the future.
Once you’ve established a relationship and your banker understands your business and your industry, ask him or her to review your business plan. It’s one of the best ways to utilize your bank’s resources. And if you don’t have a plan, create one.
“Companies should ask banks to review bank statements and financial plans with a critical eye and not just provide the information to the bank for review but also ask for feedback,” Kelsheimer says. “It’s important to take the feedback seriously. Whether one agrees or disagrees with the banker’s opinion, it’s always good to get good objective information on what a bank might see in the marketplace relative to experience of the actions taken by other companies.”
Your banker has a true advantage of having a national, regional and industry-specific perspective on economics.
“One strategy is to sit down with their banker and ask for input as to what execution risks the bank sees in the financial plan,” Zang says. “If a company is able to adequately respond to the what-if scenarios that the banker may pose and it can still achieve its plan, then it is probably well crafted and well thought out. Another strategy is to sensitize the plan by testing the numbers under various outcomes.”
There are a number of questions about your plan that you should be able to bounce off of your banker. Are the assumptions of your business plan reasonable for the current economic environment? How does it compare with other companies in the same industry? How can the plan be improved? What type of contingency plan should be in place? And finally, what products and solutions can the bank offer to help meet your company’s needs?Take advantage of products and services
At least once a year, you should sit down with your banker to review the products you’re using. Perhaps you’re paying fees for a product you rarely use or technology has advanced and greater efficiency can be had.
“I suggest that the banks should periodically be engaging with the business, not just to review financial situations or understanding of the business but also to review products and services that are needed and are being used by a client,” Kelsheimer says. “It’s typically in that setting that we’ll often find opportunities for cost savings or cash flow improvement.”
One of the main priorities right now is maximizing cash flow. Among popular products today are rapid deposit solutions, a desktop scanner that allows you to automatically deposit checks into your account.
While you might be thinking short term, ask your banker about options that will help you now and in the future. Interest rates have dropped perhaps you can capitalize on a new loan or refinance. Discuss with your bank how long you’ll need to borrow on a loan and how much money you’ll need to borrow to structure a plan and lock in fixed interest rates while they’re low.
But once again, banks seek to be an adviser. Some banks offer seminars and informational Web sites as additional resources to finding efficiency. And many banks, if you’ve maintained honest communication with them, will honor your need for them to be flexible.
“You want a bank that has a broad spectrum of products and services,” Huber says. “Because a business is one thing today doesn’t mean it won’t change or grow into the future. I think it’s good to assume your bank can grow with you.”