Every organization needs a bank, but not every organization has the same needs when it comes to its banking relationship and services. While government entities cities, school districts, etc. also require this essential business relationship, they may not know that there are government banking services available that go beyond traditional banking.
While the basic banking needs of the public and private sectors are similar, the demands each faces are often very different. Government entities face more stringent audits, tighter budget restrictions and state and federal regulations. Because of this, government banking is a highly specialized process, one that requires specific skills and a strong bank.
“In banking, all customers have different needs,” says Logan Thibodeaux, a relationship manager and an industry specialist focusing on the government sector for Wells Fargo Bank. “Government banking offers a solution to the specific and unique needs of public entities.”
Smart Business spoke to Thibodeaux about the differences in government banking and how they can benefit public entities.
How can banks inform public entities about the existence of government banking?
Like anything else, it’s about working the phones, pounding the pavement and spreading the word. Nothing is better than a good word-of-mouth referral. Once you establish a great working relationship with one government entity, it’s easier to go out and build deep, long-lasting relationships with other government entities. Also, you have to stay active in the community. Attend conferences, network, and get involved in charitable endeavors. Great human relationships can lead to great business relationships.
What should an organization look for in a government banking program?
Expertise and broad capabilities: The bank’s relationship managers must be seasoned professionals who understand the unique needs and challenges facing government and institutional clients and have the power of a national practice that combines both specialized relationship banking with capital markets-based financial solutions.??
Coast-to-coast practice: Look for a national government and institutional practice with clients representing state and local governments, not-for-profit health care organizations, institutions of higher education and tax-exempt institutions.??
A trusted adviser: The bank’s clients should think of it as a trusted adviser, and it should be committed to earning this reputation by leveraging its expertise to bring relevant ideas and recommendations that will help them articulate and achieve their organizational goals today and 10 years from now.??
Fast, local decision-making: It’s beneficial if the decision-making authority is at the regional level so local relationship managers can provide rapid responses to credit requests. Ask the bank if it has a dedicated service team available whenever it is needed.??
Treasury services leader: The bank should be able to provide a robust offering of treasury services that meet a high level of product quality as well as your current and emerging needs.
Is government banking conducted on a larger scale than traditional banking?
In this case, the two are very similar. Just as there are large corporations and small mom-and-pop companies in the private sector, there are small, quiet government entities as well as large, complex entities. Like traditional banking, the key is offering the same focused, hands-on service to all clients, no matter how big or small they may be.
What are the biggest differences between government banking and traditional banking?
When you work with a traditional company, it’s usually pretty straightforward. They sell widgets; they need accounts receivable and payable, payroll, check cashing and depositing, and things of that nature. You generally know what you’re getting into and what that client needs.
In government banking, it’s more about what the government entity is required to do, how it’s required to do it and when it’s required to do it. The accounting rules are different; the balance sheets are different.
You have to be mindful that a government entity is responsible for allocating its resources in the proper channels and evaluating its budget; government banking provides the products and services to help them do that.
Also, with accounting and auditing procedures, you have to be very responsive. Auditors, as required by state and federal statutes, will be closely watching those government entities, so you have to be responsive to those needs. When a government entity needs confirmation of collateralization or balance of interest rates, you need to have that information available in a timely fashion.
Are government entities more heavily regulated by state or federal authorities?
There is definitely more regulation from the state, so you always need to be mindful of any legislative changes occurring in your state. New laws that impact municipalities are passed every year, so you need to stay on top of that. Still, keep an eye on federal regulations as well. Particularly in this economic environment, you never know when a new piece of legislation will affect your city or state.
Logan Thibodeaux is a relationship manager and an industry specialist focusing on the government sector for Wells Fargo Bank. Reach him at (281) 652-4029 or Logan.Thibodeaux@wellsfargo.com.