Getting more bank for your buck.

• Author: Prendergast, S. Lawrence
• Position: Treasury Management

Although banks are vital to most businesses, the relationship isn't always as harmonious as it could be. But as AT&T's experience demonstrates, you can be a more satisfied customer.

About six years ago, we asked our primary banks if they would be interested in entering into a partnership with us unlike any we'd had with them before. We asked each bank to make an investment in learning about our cash-management operations in order to help us improve our processes.

What was the logic behind the proposal? First, we recognized that banks know much more than we do about cash management, so we wanted their best people to study our operations and make some recommendations. We agreed that if we had any bids or proposals, the banks would be able to bid, but we couldn't guarantee that they would get the business. In return, we offered to spend a great deal of time and money studying their telecommunications needs and problems, with the understanding that we could bid on any of their proposals.

The partnership bore fruit with some of the banks, and AT&T and the banks all benefited from the process. Since banks and customers don't always see eye-to-eye, success doesn't always come easily, but it is possible.

KEEPING BANKS HONEST

At AT&T, banks provide us with many operational services. We have approximately 87.2 million remittances annually, which includes 13 million payroll items per year. Sixty-two percent of our employees (mostly the monthly management payroll) are on direct deposit of payroll. We have seven retail lockbox banks, four wholesale lockbox banks and our own in-house lockbox, where we process 3 million items a month.

The in-house process provides another processing option that's competitive with bank pricing and quality, and it keeps the banks honest in their pricing. It also gives us a backup facility in case a bank is unable to process. Conversely, we can move volume out of our in-house lockbox into the banks.

The banks provide us with other services, too. In June 1993, we established a 364-day, $6 billion revolving-credit facility with 65 banks for general corporate purposes, including a backup for commercial paper. AT&T arranges for letters of credit with approximately 20 banks, and for foreign exchange contracts we also use about 20 banks. We invest in money-market instruments issued by banks, sometimes buying them directly from the banks. At other times, we purchase instruments in the secondary market.

We have approximately 65...