Take charge of managing your banking relationships.

• Author: Bort, Richard
• Position: Treasury

A successful banking relationship is one that builds over a long period and that is profitable to both parties. A relationship in which one of the parties is continually squeezing the other is not a good one and will end at a time that is probably inconvenient for the customer. Like a sound marriage, a strong banking relationship requires continual attention, good communication, development of mutual trust and confidence and latitude for both sides to "spread their wings."

The words above are as true today as when written in 1989, in the first edition of the Corporate Cash Management Handbook. Note the two key words: "relationship" and "profitable."

Banks are the core of the company's financial supply chain, yet the bank relationship is unlike any other vendor relationship. While the bank's products are largely commoditized services, its delivery of those services can be critical to the success of a business.

The financial manager's task is to nurture the relationships with the people in the bank to ensure that those needed services are provided competently and in a timely manner. Also, the relationship needs to have an openness that invites the banker to understand the business and to contribute new ideas, innovations, technology and services that may be useful in propelling the business to new heights.

Banks are profit-seeking institutions and, as such, effective bankers pay greater attention and provide greater support to those customers that they perceive will offer greater profitability. A profitable relationship typically requires multiple products and services, since no single service alone will provide the profitability that a modern bank demands. It's like the restaurant in the downtown high-rent district where the banker takes you to lunch. A reservation is necessary because the place is a popular with the business crowd on expense accounts. But unless the restaurant also does a substantial dinner business, it'd only be covering its overhead at lunch and not providing the profitability needed to grow.

In banking terms, this means that if the company only borrows from the bank but conducts all of its cash management elsewhere, the bank will not reach its target level of profitability. Likewise, if a company uses a bank only for its disbursing services, but deposits and concentrates its funds elsewhere, the bank probably will attempt to expand the services only until such time as it sees no realistic probability of success.

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