Companies, particularly those with many cross-border activities, often use multiple banks worldwide to manage their business operations efficiently. The greater the number of banks, the greater the challenge for treasurers to keep track of the fees and service charges that have been agreed with each of them.
Corporate structures are often complex, with the data and documents relating to contracts signed with each bank dispersed across the company. Decentralised storage, frequently in the form of paper files only, renders it difficult for companies to check whether fees paid correspond to the fees agreed upon or whether any rebates have been correctly applied. As a consequence, an analysis of bank fees is often very labour-intensive. It is almost impossible to accurately verify the international bank fees across a company. For management, this makes it difficult to obtain a global overview of their bank fees and to control their international cash management fees.
Electronic Exchange of Information
The current trend worldwide increasingly points into the direction of an electronic and standardised exchange of information between banks and customers. This trend can already be witnessed in the increasingly widespread use of the standardised extensible markup language (XML) formats that have been implemented for electronic payments across Europe – where the single euro payments area (SEPA) gets underway on 1 February – and are also available world-wide, for example, as the common gateway interface (CGI) set of XML formats.
Moreover electronic bank account management (eBAM), which has become a hot topic in recent years, is likely to significantly change and simplify the way in which banks and their customers communicate with each other in future. TWIST is one of the initiatives that seek to expand this standardisation of electronic bank-to-customer communication and offers a reporting standard for bank fees. Further standards for bank fee reporting exist and include, for example, ISO 20022 camt.086.001.01, TWIST BSB 3.1 XML Messages, and the (US) Format Ansi x.12 822 (‘Bank Analysis’).
Standards such as these require bank reports to be, among others, sent regularly in accordance to what was agreed between the bank and the company. The bank report should also contain specific details of the client to facilitate easy allocation of the information.
For companies to benefit fully from the standardisation of the bank fee reports, they should invest in a system with capability to automatically import such reports, analyse the fees paid, compare them against those agreed on in the original contract, and reconcile them.
With such an automated solution, companies can immediately verify, for example:
- Whether fees charged by the bank are calculated based on service prices that were agreed upon.
- Whether the volume of the financial transactions correspond to the actual volumes.
- Whether agreed discounts were actually granted.
- Whether possibly excessive fees were charged.
Beyond verifying the fees, companies also naturally seek to automate any further steps in analysing and reporting on bank fees and volumes. The solutions they employ should therefore cover several key features in order to achieve straight-through processing (STP) for bank service fees:
- Dispute resolution workflow management, for example in case a bank is mispricing its charges.
- What-if analyses to create scenarios.
- Comparisons between banks or between specific accounts.
- Trend analyses by company codes, regions and countries for planning future bank fees.
- An electronic archive of bank statements and simple tracking of statements and specific items.
Benefits of Automated Bank Performance Analysis
When such processes are automated, companies not only benefit from a global overview and full control of all their bank fees but are also much better informed when they negotiate the next contracts with their banks. Through a central archive of all bank-related documents companies can easily track the history of their bank relations and fees, which help build a stronger negotiating position. As a result, banks can profit from optimal levels of fees for their operations and thanks to automation they also save time and costs in processing the data.
Management of bank fees thus becomes fully transparent and highly efficient.