Getting the most out of banking relationships

Healthcare Financial Management, April, 1994 by James S. Sagner

In response to a recent informal survey, bankers gave several reasons for meeting with their clients: tradition; because that is what the competition does; to entertain clients (golf, lunch, or a baseball game); to determine whether the client is still solvent and capable of paying off a loan (or the current month's banking services bill); and to provide another "call" against the banker's list of objectives (so that the banker's job is secure for at least another month). The most important reason bankers should meet with their clients--to review bank products and services as they relate to clients' business requirements--was not mentioned by those bankers surveyed.

The reasons the bankers gave are outdated and wasteful. Both those bankers surveyed and their clients should work at improving their relationships.

The importance of consultative relationships

A consultative relationship between client and banker helps to ensure a mutual, long-term business commitment. Consultative selling requires the banker to ask probing questions in order to fully understand a client's products, services, markets, competition, regulatory constraints, staffing issues, and other business factors. This is the best way for an "outsider" to fully understand an organization's problems.

In a typical meeting with a banker, however, the banker often asks what is new at the client's organization and then explains the latest product or service that the bank offers. This is a costly way to do business. Information about an organization can be obtained from databases and publications, and bank product information can be distributed from exhibitor booths at trade shows and promoted by advertising. Face-to-face meetings are not required for this information exchange.

Little consultative activity occurs during most meetings because most bankers are neither trained nor motivated to ask about problems and to offer solutions. Bankers' compensation is based on product sales, either directly through commission incentives or indirectly through salary increases measured by performance (based on number of sales and/or the amount of sales calls). There is tremendous pressure on bankers to meet with clients and to sell products. Given current expense control initiatives in many banks, sales meetings are expected to be as productive as possible.

In less-pressured economic times, financial managers typically had more time to meet with bankers and to describe their organization's latest developments and problems. Given the current climate of staff reductions in organizations throughout the United States, financial department staff members today are often performing the jobs of two and even three people and simply do not have the time to waste on unproductive meetings with bankers.

Productive banker meetings

Healthcare financial managers should prepare a list of topics to discuss with their bankers in order to help ensure that time spent together will be productive. This list should include:

New product development. Has the bank developed an innovative approach to a financial management problem that may simplify its client's work effort? An example would be the development of products that outsource receivables and payables to the bank once transaction files are established.

Organizational/strategic changes. Is the bank planning to abandon certain businesses or types of clients (for example, those clients outside its target market as defined by size, geography, or type of industry)?

Pricing changes. Does the bank have plans to raise its cash management fees? Banks often "forget" to announce a raise in fees, hiding them in the monthly account analysis.

Plans for upcoming conferences and seminars. Is bank-sponsored continuing education available to train financial managers and their staffs? Many banks are providing such training to build customer loyalty and to assist in certified cash manager (CCM) certification.

Industry and competitor developments. Does the bank have other healthcare organizations as clients or prospects? If so, the banker may be an excellent source of nonconfidential market intelligence.

Too many meetings with bankers are ineffective because neither party has properly prepared for the meeting. Wise healthcare financial managers use meetings with their bankers as a time to learn about the bank while making sure that the banker consults with them, not merely tries to sell products to them.

James S. Sagner, PhD, is executive vice president, Sagner/Marks, Inc., a treasury and cash management firm in Chicago, Illinois. Readers' comments and questions are welcome and should be addressed to him at Sagner/Marks, Inc., 117 N. Jefferson St., Suite 201, Chicago, Illinois, 60661-2306.