Scrutiny of analysis statements may uncover savings - bank analysis statements

Healthcare Financial Management, Nov, 1991 by Leslie N. Masonson

Healthcare financial managers may overlook a significant opportunity to save money on their banking services by failing to receive or carefully review account analysis statements. Savings of $1,000 to $25,000 a year are possible, depending on a facility's size.

Account analysis statements, which banks provide in addition to standard account statements, show balances maintained in an account each month, adjusted for the bank's reserve requirement (usually 12 percent), plus a listing of bank services used and their prices. In essence, an account analysis amounts to an invoice for services rendered.

Clients must request account analysis statements. BAnks can provide them for every account--along with a summary analysis combining all accounts held at a bank--each month. Statements usually are mailed within three weeks after a month's end. Most banks use varying formats and terminology, which makes comparisons difficult.

Statements usually are prepared by banks' computer systems rather than by hand. Most banks reduce available balances by the cost of reserves but provide an earnings credit rate equivalent to the three-month U.S. Treasury bill rate. A bank should not charge a fee for preparing an analysis statement.

Analysis statements should not be discarded or filed away without being scrutinized. Just because a statement looks complicated and incomprehensible does not mean that it should be put aside until a later date. Later never arrives.

Six steps. To receive and make the most of account analysis statements, follow these six steps:

* Ask banks not currently providing account analysis statements to send them each month;

* Unearth and examine filed-away statements line by line;

* Ask bankers or cash management salespeople to look into unclear or questionable statement information. They should explain or clarify each line and number causing concern;

* Create a spreadsheet program of account analysis information for each bank for at least the last six months;

* Look for increases in bank pricing, dramatic transaction volume changes, and other inconsistencies. Determine whether information is accurately reported by the bank, then ask the bank to correct errors and issue a revised statement for months in error; and

* Review statements for the following money-saving opportunities.

Overfunding accounts. Determine whether accounts hold excessive balances. This determination can be made by looking for wording such as "balances available to support other services." Remove excess balances and keep only enough funds needed to support banking services.

Use excess balances for investments or to pay off loans. Even better, leave minimal balances in accounts and pay the bank by fee. For example, assume a bank requires average available balances of $100,000 to pay for services each month or charges a fee of $2,000 for them. A healthcare facility is better off paying the fee, leaving as small a balance as possible ($10,000, for example), and investing the original balance. A balance of $10,000 will reduce the fee to about $1,800.

Unnecessary accounts. Close any accounts with little or no activity. Why pay $10 or $25 a month to maintain an account with no transactions? Question service charges that are unclear, such as miscellaneous adjustments, lockbox minimum deficiency, and special services. Find out what these terms mean and eliminate unnecessary charges.

Unneeded services. Weed out expensive and unnecessary services. Does a hospital need to send its current level of wire transfers or can it use an automated clearinghouse (ACH) instead? An ACH often is 20 times less expensive than a wire transfer.

Is an attached envelop required for each check photocopy in a wholesale lockbox? If not, about 5 cents can be saved per transaction.

Is a hospital's bank providing a full reconcilement for payroll or trade payable checks? If so, perhaps the facility already has an account reconcilement module in its accounts payable software. This function can handle the job less expensively than a bank.

Smarter cash management begins with reviewing account analysis statements for accuracy, unnecessary services, and incomprehensible services. Each bank's statements also should be tracked on a spreadsheet. In the end, financial managers may be surprised by the amount of money to be saved in banking cost.

Leslie N. Masonson is president of Cash Management Resources, a cash management consulting and training firm in Monroe, N.Y. He is author of Cash, Cash, Cash: The Three Principles of Business Survival and Success. Readers' comments and ideas for future columns are encouraged and can be addressed to him at Cash Management Resources, 20 McGarrah Road, Monroe, NY 10950