How To Get The Most Out Of Your Banking Relationship

Small business banking is often just one of hundreds of priorities those managing SMEs must juggle on a daily basis. When there is already an expert team in place at the bank dealing with your financial requirements for you, it can be easily overlooked in favour of business activities that require a more hands-on approach.

Banks deal with SMEs daily, and most have tailored services to fit their needs. Yet the person within a small business interacting with the bank and taking on financial management responsibilities often isn’t a specifically qualified or trained financial specialist – simply because in small companies, job roles span further and wider than traditional corporates due to resource scarcity. That said, of all the areas that a business should look to really hone in and focus on with a well-trained eye, finance is definitely one.

As with all areas of business innovation, banking has seen a variety of new players come to the table when it comes to offering banking services to small businesses, and as a result, the industry is just not growing but also changing fast. Many of the banks currently offering business services are not the traditional high-street names you’ll have already heard of – and with these new entrants come a new way of ‘doing business’ and a new, strategic, relationship-building focus within the sector.

The lack of resources that many SMEs suffer from is commonplace, particularly when starting up. Most do not have the time, money or appetite to hire a whole accounts department, and we at Finance Equation Ltd appreciate that. You can’t do everything! This doesn’t mean, however, that your business needs to open a bank account and leave any further thought on it until the end of the financial year; or, as unfortunately is often the case, until there is a cash-flow or other financial problem. Instead, you can nurture your business relationship with the bank year-round in a strategic and prosperous way by hiring a part-time financial director to manage the relationship for you.

Why You Should Strengthen Your Business’ Relationship With The Bank

A survey by BCSG found that 73% of small business owners have never made contact with their Banking Relationship Manager. With so many business leaders having had no occasion or reason (that they believe) to meet their bank manager, few appreciate the value that a healthy working relationship with them can bring.

Far from being the stereotype of a rich old man in a suit sitting behind a large desk in a lavish office, bank managers are now more involved than ever, working on business development, service innovation and tech solutions. While many in business still view their bank as a vendor – someone there to sell and lend them money and financial support when required – in fact, modern small business banking works much more around partnerships and growth. Banks are in place to make money, of course, but they stand in better stead to do so as their small business investments and customers grow and flourish. The encouragement and nurturing of their journey is as much the growth of the bank’s own business as it is their customers’.

When a business is in regular contact with their bank and their working relationship is healthy, they are more likely to receive favourable credit terms, updated service offerings, any business ideas or development tools that the bank have available and free business advice and information. Working with, rather than just occasionally for, your bank can create a value-adding strategic relationship for both parties. But how to best foster a relationship of this type? Read on!

Keep Communications Clear, Concise And Open

If no one in your business has ever spoken to someone at your bank, now’s the time to get in touch. Small business banking requires a much greater understanding of a company than the services offered for large corporates, and bank managers always appreciate learning more about their clients. Your bank will likely already know the basics of who you are and how you operate but it is beneficial for them also to understand who your customers are, who your vendors are, and what the latest updates and developments in your industry are.

Bank managers appreciate the proactivity of businesses approaching them to discuss how and where they are as a firm and will value the opportunity to interject and contribute with ideas, advice and services. Despite many businesses considering their bank manager just a knowledge base on finances, their expertise should not be underestimated. They deal with a variety of different businesses every day and have a unique insight into their operations. Banking staff are often able to divulge market intelligence and to give advice on development opportunities – keeping client confidentiality as required, of course. This as a resource is valuable for a business and should be utilised wherever possible.

Stay In Touch

A bank manager doesn’t need to know every time a business sells a product, but regular contact and updates on how an enterprise is performing is beneficial. This better helps them remain abreast of market, industry and company developments.

Scheduling in a regular meeting with your small business banking relationship manager will ensure a sustainable level of communication remains in place and that financial matters remain a priority. Aim for quarterly if possible, and ideally face-to-face.

Communicating honestly with your bank manager is imperative to a conducive working relationship and will help instil a degree of trust between both parties. Anyone working in small business banking would much rather help prevent issues from arising ahead of time than they would have to ‘firefight’ them reactively later. Statistics from the British Business Bank show that while acceptance rates for business finance are improving, businesses that don’t receive additional finance or credit are being turned down due to industry performance, complexity or weak balance sheets. If the bank already knows a business’s circumstances well, their ability to help as and when needed is increased.

Remain Consistent

While those working in business banking appreciate that the nature of enterprise and entrepreneurship is often evolving and changing, it is important to remain consistent on aims and goals. Demonstrating that your business has a strategy and is working towards it coherently and consistently shows credibility and trustworthiness. What’s more, it can give shape to the regular check-in meetings with banking contacts and allow for a clear vision of how both parties can work with each other strategically.

Research shows that 90% of start-ups fail and there are, undoubtedly, numerous reasons for this. Businesses must pivot and move in line with market trends, needs and fluctuations, but they, too, must remain true to themselves and their company values. The goalposts may shift but the goals themselves should not, and ensuring logical focus exhibits dependability and a want to succeed to the bank. Working the balance between consistency and adaptability is no mean feat but very worthwhile!

If your business does need to shift further than perhaps your bank would have expected when they initially offered service terms, or if further (or different) services are required on the basis of the pivot, the honest and open relationship with your bank will help reiterate to them that your firm is trustworthy and reliable when it comes to performance, and, therefore, payback.

In A Small Business With Limited Resources, Who Should Manage A Bank Relationship?

SMEs rarely have the budget to recruit a whole department of staff to manage accounts, and that’s understandable; with so many competing priorities, it can be difficult to justify mass expenditure. Instead, recruitment can be smaller and lower key. A part-time financial director can oversee and operate not just in-house financial requirements but also the burgeoning and strategic relationship with your bank manager.

Finance Equation Ltd can provide a fully qualified and well-experienced part-time financial director for your business. Our pool of FDs work with and for some of the UK’s biggest and best-known companies and can offer their support and expertise whenever you need it. Furthermore, as specialists, they already have good working relationships in place with small business banking teams and can extend this rapport and related networking to include your business.

A part-time financial director removes the need for an expensive full-time hire while still allowing access to unrivalled expertise, knowledge and networking opportunities. Managing a productive business banking relationship is second nature to an experienced FD and will take hours of time away from your business’ existing workforce – instead, allowing the focus to sit on the management and development of the business.

Finance Equation Ltd’s team of FDs have saved businesses from excessive banking fees, negotiated favourable credit extensions and waived fees, created and provided business plans, introduced and managed new banking options, and kept documentation up-to-date and legally compliant. The ability to skilfully communicate with bank managers can reap benefits for SMEs in a way that otherwise takes years to nurture, for a fraction of the cost and the effort.

Hiring a part-time financial director won’t break the bank, but it may just make it. Take the first step and contact Finance Equation to discuss options.

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