Communicating with Your Banker: By Maintaining a Positive Working Relationship, Your Bank Will Be “In Your Corner”
Communicating with Your Banker: By Maintaining a Positive Working Relationship, Your Bank Will Be "In Your Corner"
By Craig Bentley
Building a strong banking relationship may represent one of the most important tasks facing your practice, yet many consultants and business owners unfortunately view their banker as little more than a meddling "outsider." Having a bank in your corner however, can spell the difference between success and failure in creating a solid business and in having the flexibility to manage and guide it no matter what the business climate throws your way. Consider these guidelines to insure that communication with your banker is first–rate:
Selecting a Bank
Selecting a banking institution is of paramount importance. There are several things to consider when choosing the bank that's right for you.
Size of the Institution
First, is your intended bank able to meet your borrowing needs? A bank's "legal lending limit" imposes a maximum that the bank may lend to any one customer, so choose a bank that can meet your current needs and one that has sufficient resources to grow with your firm.
Second, the size of a bank may affect the services offered and dictate which market segments it serves. If your practice is especially small—say a solo—make sure your bank is committed to small–business lending. And be sure you both agree what "small business" means! Talk with peers for recommendations of banks that work actively with a business similar to yours.
What services will be important as you look to the future? Cash management? International banking? Investment–management services? Think about what you need now and what you may need in the years ahead.
Bankers do try to understand your business, as well as any unique factors in your industry. These might include extended terms for accounts receivable, the need for deposits with vendors, inventory practices or higher cash requirements for daily operations. Ask your banker about the bank's personal experience with your industry. Does it serve any of your competitors or firms in related industries or professions? If so, what has been its experience in such areas? This is important because a bank's direct experience may have an affect on its relationship with you, regardless of your practice's financial performance.
Finally, get a commitment from the bank as to who will be servicing your account. Ask about your rep's level of authority. Then make a careful judgment as to whether you can work constructively with that individual. The personal rapport you develop and the trust that is created will have a great impact on the support you receive.
Managing the Relationship
Once you have chosen your bank and banker, immediately create an active dialogue. Communication between parties should be clear and concise. Keep your banker informed about financial and market developments and changing industry trends. Provide sufficient detail so your banker can explain your business and future plans to colleagues, especially to those making credit decisions.
Deal with Integrity
You must build a high level of trust with your bank, so manage your business with the highest integrity. Establish clear guidelines to ensure that employees follow company policies and procedures. All communications with your bank must be clear and accurate, and presented in such a way as to encourage a genuine understanding of your major business and financial issues.
Keep Your Banker Informed
If location is the rule in real estate, then "communicate, communicate, communicate" is the rule for banking relationships. It's vital that your banker is kept up to date on your company's operations, both in sales successes, as well as setbacks you may encounter. Financial statements for example should be completed on a timely and consistent basis. If this is a challenge, analyze your internal accounting procedures to uncover any roadblocks.
Prepare detailed budgets and financial projections for your banker. These give insight as to where you are taking the business as well as the opportunities and obstacles you face in achieving such goals.
Be proactive! Remember, your banker will retain greater trust and confidence in you if you are forthcoming with information.
One stumbling block is the tendency to establish regular communications with your banker when times are good and then run for cover when there is any negative variance to plan. Hard times are precisely when you should increase contact with your bank.
After all, bankers understand business cycles, yet they cannot provide support when kept in the dark. As you discuss difficult situations, be honest about the status of the company, the outlook for the business and how you are addressing your challenges. Your banker will then be able to genuinely provide guidance and may even adjust credit arrangements to help you improve your cash flow.
Remember, your banker is your spokesperson inside the bank. The more tools he or she has—in terms of information—strategies and forecasts, the better equipped your bank rep will be to "defend" your company and ensure the bank's continuing support for you.
Your Business Partner
Bankers work with many kinds of companies in diverse businesses and industries. They are exposed to many different corporate strategies, management teams and financial models, so they are well positioned to be an integral part of your team rather than an outsider. So develop a good relationship and benefit from your bank's advice and expertise.
If you choose carefully, work constructively and communicate effectively, you can ensure that your banker will be in your corner. That will prove of immeasurable help in good times and bad, and will strengthen your ability to achieve your business goals.
Craig Bentley is an executive coach and senior communications consultant with Bates Communications with over 30 years of experience in domestic and international financial markets, banking, business development and strategic planning. Contact him at 781.235.8239 or cbentley@bates–communications.com