Part I: Treasury Services.

Treasury is simple, right?  It’s the mechanics of money in and money out, and it all reconciles to cash in the bank.  While treasury is fundamentally simple, the technical details can be confusing and the most important decision criteria for finding and choosing a great banking partner are often not obvious.

Fundamental treasury services include wires, online bill payment (ACH), deposits, credit card merchant services, account management, etc.  And fees, of course.  The specifics of these services include cutoff times, funds availability times, activity limits, incoming fees, outgoing fees, notification fees, fees, fees and more fees.  While the details do matter, most banks now offer essentially the same services at a similar cost, even the small banks.  Bankers spend a lot of time discussing the details of treasury services, in part because customers are initially focused on them, but also because it helps to distract from what matters in selecting a bank.

So what really matters?  Here are some of the things I look for when evaluating bank treasury offerings:

Minimum average collected balance (MACB): this is how much money must be kept in a non-interest-bearing cash account to cover the monthly banking fees.  The balance requirement is calculated using the total fees and the Earnings Credit Rate which is an interest rate used to offset the fees. To give an example of the wide range this can take, one company I know saw the minimum balance range from $1.6 million to $14 million between banks

Interest income: once the MACB is reached, what can be done with extra cash?  Savings, money market, bonds and investments are all on the table, depending on risk tolerance and needs for quick access to invested cash. Savings interest in particular can vary quite a bit with some banks not even offering any. Coupled with the MACB, the same company had the opportunity to go from fees of $33,000 to income of $62,000; a yearly swing of over $95,000.

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Deposit insurance: the FDIC only insures the first $250,000 of a company’s deposits.  Some smaller banks in MA have access to a fund similar to the FDIC that covers 100% of deposits, regardless of amount.  Do you keep prepaid customer money?  This might be a nice feature.

Proactive advantages: how can the bank help your business outside of simple treasury?  Finding a bank that will look for ways to make your products and business more compelling can lead to competitive advantages that are hard for others to duplicate.  A good bank can find ways to help your company that you may never have even considered.

Customer acquisition: Will your bank help you find new customers?  Does your banker have a rolodex and is s/he willing to make connections?

These discussions also serve to shed light on the kind of relationship that the bank offers:  proactive or reactive, dynamic or static?  Finding a good banking relationship that can energize your company’s growth can make treasury not just simple, but very interesting indeed.

If you have any questions about this article or want to talk about how to find a great banking relationship, contact me at  617-855-5439 or jmarcos@complexityclarified.com.