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Are your bank fees in compliance with your payables policy?

Have you ever sat down and read your company’s policy on handling payments to vendors?  I know, I know! Dozens or hundreds of pages on GL coding, invoice tracking methods, multifactor payment controls, business process descriptions and mind-numbing details.   A typical company payables policy outlines the processes and controls around paying all of the company’s vendors.  They are detailed because they have to be in order to control both risk and expense.  With all of this designed control, many companies still pay some of their most important vendors, their banks, by skipping the entire policy.

I have sold treasury software in the large corporate space for more than twenty years and I have been amazed at some of the onerous processes that vendors must comply with to get paid.  Invoices in triplicate, wait and review periods, line item approvals and more, all leading to delayed payments.  Companies rightly enforce these stringent rules in the name of savings and security.  Then, I sit down with these same companies to review the controls around compensating their banks and I am amazed at the difference.  In most companies, the fees for transactional banking services are directly debited from the company’s bank account without the possibility or practice of any review.  The fees are assessed, the fees are collected and the process is complete, fully automated without any due diligence at all.  Because of the lack of attention paid to the charges billed for transactional bank services, recent studies have indicated that as much as seven to ten percent of bank fees are billed in error.  It isn’t that banks intentionally mis-charge for services, it is simply the fact that the number of billing points and the sheer volumes involved multiply the impact of otherwise miniscule billing errors.  What may be a single error of single pennies or Euros expands greatly with volumes in the thousands over hundreds of bank accounts.  In most companies, those errors add up to real money, and are too significant to continue ignoring.  

Accountability

Accountability with most of our vendors is established through the controls built into our vendor payment policies.  If we are to achieve a similar level of accountability with our banks, we must establish a controlled fee review process.  That process starts with accessibility!  If we are going to perform a review, we must have access to the consolidated information on what each bank is charging us for in our accounts each month.  In the US, this has been available for decades in the form of the somewhat standardized account analysis statement that can be delivered in a variety of formats, including a fully automated EDI version known as the 822.  Globally, banks now have the ability to deliver our fee billing information in a machine-readable file format known as the BSB.  This file format is available around the world, and is managed by the same standards body that brought us SEPA, ISO 20-022.  The BSB provides a currency and country independent way for any bank to report the fees associated with transaction accounts located anywhere in the world.  In the most recent BSB survey, more than twenty banks reported the ability to deliver fee information in a BSB formatted file.  If we are going to solve the problem of error-prone bank fees, we must have accessibility to the billing information, and the BSB file format solves that problem once and for all.  So, how do I get these mythical BSB files from my banks?

Strategy for obtaining Bank Service Billing files

If you were to reach out to your account officer at each of your banks and ask them to start delivering the industry standard BSB file format each month, you would likely get a blank stare in return.  While more banks each month are developing the capability, it is not publicized enough to be common knowledge to all of the bank’s employees.  Banks can be complex organizations to navigate, so I have developed a communication strategy to help coax the best possible billing statement option out of each of my banks.  First, reach out to the person you have the closest relationship with at your bank.  Tell them you are beginning the process of analyzing and auditing your bank fees and you need to receive a monthly summary of all of the transaction, maintenance and other fees that have been assessed.   Tell them that there is an XML based file format that has been adopted by ISO 20-022 that allows them to seamlessly report this information each month.  Point them to the SWIFT website for all of the details (https://www2.swift.com/mystandards/#/mx/camt.086.001.02!content).  

In some cases, the account officer assigned to you will not have any knowledge of the bank’s capability to produce the billing statement so you will need to encourage them to dig.  In many banks, there is a global billing group and if not that, the cash management or operations group within the bank can probably help get the conversation started.  We know one thing for certain:  Your bank has figured out very well how to efficiently extract the fees for the transactions from your bank account.  We are not asking them to do anything but report on the fees they collected, and the fact that they collected those fees shows that they can give us a reporting of them.  Sometimes you may find that one of your banks cannot yet support the industry standard BSB reporting.  In these cases, we simply remind them that we require a reporting of all fees that are charged to us and ask them what format they can provide the information on at least service usage (volume) and cost.  Since we know they are effectively charging our account, we know the data is available somewhere within the bank and even a csv formatted file can usually give us enough information to do an audit and analysis of the fees we are being charged.  


If history tells us anything, it is that banks respond to customer pressure, and the more customers that demand their banks provide visibility into the fees they charge through industry standard formats, the more likely they will be to give us the relief we need.


This item appears in the following sections:
Bank Relationship Management & KYC
Bank Fees Reconciliation & Negotiation
electronic Bank Account Management
Evaluating Banks' Overall Performance

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