How do companies that do a good job managing their banking costs approach bank negotiations?
CFO’s who actively manage bank pricing bring a distinctive perspective to banking negotiations. First, these CFO’s know that bank pricing is as important for companies as it is for banks, though for a different reason. In most bank negotiations, the payback for managing bank pricing isn’t a one time cost saving. Up-to-date bank pricing establishes a base line for future increases and sets up multiyear returns. The result may not quite be an annuity, but it’s close. Bank cost savings are generally assumed to have a 10x multiplier effect on shareholder value. A $50,000 cost saving opportunity that yields a $500,000 shareholder value increase is an opportunity of real substance. The shareholder value yardstick gives bank pricing much needed visibility and highlights the real cost of letting fee negotiations slide.
