According to the Blue Book of Bank Prices (Fall 2009), banks raised cash management fees, on an industrial average, 3.6% in 2009. Expect the same in 2010. So lockbox services, ACH debit card transactions, and checking overdraft fees are higher.
“Bank managers have the power to forego or reduce these fees! So negotiate.”
Gary Bode CPA
Wilmington NC Tax Accountant
What These Fees Mean to Your Company: Does $1000 less expense = $1000?
Are these fees material to the company? Let’s look at a numerical example from the perspective of the CPA for Wilmington NC Widgets, our demo company. Banks have a variety of fees and don’t always make an effort to state them. So the first step is determining what fees are being incurred for what services. So the CPA for Wilmington NC Widgets runs a QuickBooks bookkeeping report. The CPA was smart enough to have a QuickBooks category that captures all their bank fees in one place.
We discuss how to reduce these bank fees below, but let’s assume the CPA is able to save WNW $1000 on them. That’s $1,000 less expense, or, $1,000 more gross profit. WNW’s owner compensation ultimately derives from gross profit. To generate that same $1000, at a 60% gross profit margin, Wilmington NC Widgets would have to produce additional services/products and collect an additional $1,667 (1,667 x 0.6=1,000). So cutting costs is more effective, relevant to funds available for owner compensation, than generating more gross production and revenue.
How to Reduce Bank Fees
First, your business should only pay for bank services it needs. Pretty obvious, but as CPAs we see instances where streamlining the banking relationship is worthwhile. Next, if your company bounces checks, have your local Wilmington NC CPA help you with cash flow.
“Your company shouldn’t feel like a supplicant at its bank.”
Gary Bode, CPA | Wilmington NC Tax Accountant and QuickBooks Consultant
Start thinking of your bank as just another vendor. The banks have to make enough to stay in business. But your company is important to at least the local bank branch manager, so get to know him/her. The bank tracks his/her performance, in part, on his “numbers”. They can negotiate many types of bank fees. At a certain level of financial volume, your company becomes important to the main bank branch in Wilmington. Sometimes a company needs to take that step up and engage the local VP. And you generally don’t have to play hardball either to get results. A good bank relationship is important to any company. But there are lots of banks in Wilmington.
If you need a free initial consult with a Wilmington NC CPA firm on any accounting, business or tax preparation issue, please call us at (910) 399-2705.
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