Getting the most out of your banking relationship

Every business has a bank account. Most businesses will also have a relationship manager who managing the bank’s relation with your business. Small businesses may not have a named relationship manager and may also find themselves dealing with a call centre.

If your business has a relationship manager – great! But how strong is that relationship? Like any worthwhile relationship, your banking relationship should be supportive and collaborative. Is your bank supportive of your business?

Check your bank’s pro-activity

Your bank manager should be acting as a guide to the bank’s products & services that could help solve your financial headaches or support your business growth.

Ask yourself the following questions to check your bank’s pro-activity:

• Do you have a named relationship manager?
• Does your relationship manager understand your business?
• Do you recall when your relationship manager last contacted you?

If you would answer “no” to any of the questions then your business is unlikely to be getting a sufficiently pro-active service from its bank

In that situation a business should consider seeking an improved banking relationship through:

• Requesting a change of bank manager or banking channel
• Moving to a more pro-active bank

Check your business’s pro-activity

Any good relationship should be two-way. We have looked at the bank’s side of that relationship equation. We shall now look at some practical steps a business itself can take to improve the banking relationship.

Ensure accurate financial forecasting

• Don’t ignore mid-month overdraft peaks – build in headroom. For example, what would be the consequences if your payroll were due on the 25th of the month but your biggest customer delayed paying you by a week from the 21st until the 28th?
• Don’t commit to onerous debt service obligations (interest payments & capital repayments) – that could risk leaving your cash flow too tight for normal trading

Maintain good control of cash

• Don’t rely too much on short term borrowing – it requires annual renewal and could leave you open to changes in pricing (likely to be upwards!) or, even, refusal to renew
• Don’t use cash to purchase capital assets if that could leave you short of day to day working capital
• Don’t lose focus on debtor control – a bad debt can seriously hurt your cash flow

Communicate with your bank

• Keep your bank informed
• Don’t hide bad news – Banks hate surprises

Keep your side of the bargain

• Don’t breach terms and conditions of loan agreements – if it says the provision of management accounts within 21 days of month end then ensure that happens
• Don’t give the bank any reason to question its level of support for your business

Be aware of your business vulnerabilities

Don’t be too dependent on one supplier – you leave yourself open to the risk of price hikes or reduced credit terms

Don’t be too dependent on one customer – you leave yourself open to the risk of delays in receiving large payments or, even, of the customer taking their business elsewhere without warning

How Ampios Can Help 

Here at Ampios, we have a team of dedicated specialists that can work with you and your bank. We can also help you find not only a more pro-active bank but also the most appropriate forms of finance for your business now and in the future. We have comprehensive links with banks and alternative finance providers. If you need to get in touch, we’d love to have a chat. Give us a call on T: +44 (0)333 987 4672 or send us a message via our contact form.