Why senior executives should care about RFPs.

• Author: Ochs, Joyce R.
• Position: Treasury

Issuing requests for proposals (RFPs) for cash management and other treasury services has become standard procedure in most companies. Effective RFPs provide a way to stimulate competition for your business, establish good working relationships with banks and lower bank service costs.

In a recent survey about RFPs, almost half of the treasury management respondents said their company planned to issue one RFP between 2004 and 2007; just over half said their company would issue two or more RFPs in those years; and 15 percent said their firms will do one RFP per year. Half of these RFPs will be for a single service, and half will be for multiple bank services. Furthermore, respondents said they would consider issuing RFPs for services such as custody services, investment management, forecasting systems, letters of credit and bank lines of credit.

The benefits of an RFP only accrue if it is effective. An ineffective RFP is a waste of staff and time. Bankers say that many RFPs they see are hard to decipher. They can't tell what's important to the company, what it is looking for in specific terms or what the company's requirements are. Not surprisingly, ineffective RFPs usually result in unsatisfactory proposals from banks.

The Role of the CFO or Treasurer

The CFO or treasurer of a company has a unique role in the RFP process to ensure that the RFP is consistent with the objectives of senior management. And there are potential pitfalls to be avoided.

For instance, many banks today are interested in granting lines of credit only to a company that can also give them additional noncredit business. Yet many banks are beginning to pick and choose which among the hundreds of RFPs they receive each year they will respond to. In fact, one money center bank has developed a quantitative method (similar to credit scoring) by which it evaluates RFPs.

While not a part of the RFP team, the treasurer or CFO knows the larger picture and must supply the oversight to make sure that the appropriate banks are included. The staff involved with the daily activities of cash management may use different criteria to identify potential RFP recipients.

In addition, the CFO or treasurer can provide the leadership to keep the RFP team focused on the specific, identified goals of the RFP project. The better the RFP, the more likely it is that the banks you want to respond to it will respond. The treasurer can provide a review function to check on the key points of the RFP:

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