Every month, detailed bank statements arrive that list every charge your organization incurs. Whether they come via computer or in your physical mailbox, they can be pages long and difficult to understand. So, how can your treasury team easily make sense of them?
As a treasurer, having a deep understanding of your account analysis statement is important for effective cash management, cost control, and overall financial transparency. The account analysis statement provides a comprehensive view of bank charges, balances, and interest earned, enabling treasurers to make informed decisions and optimize their banking relationships.
An account analysis statement is a detailed financial document provided by banks to their commercial customers, typically monthly. This statement serves as a comprehensive record of all the account activities, service charges, fees, and earnings credits (ECR) associated with the bank accounts held by the organization.
The primary purpose of the account analysis statement is to offer a transparent and itemized breakdown of the costs and benefits of the banking services used by the organization. By doing so, it enables organizations to monitor and manage their banking relationships more effectively, ensuring that they are receiving fair value for the services provided.
For treasurers, the account analysis statement is an invaluable tool for several reasons:
The account analysis statement details all service charges and fees incurred over the period, allowing treasurers to identify and scrutinize these costs.
By understanding these charges, treasurers can negotiate better terms with their banks or explore more cost-effective banking solutions.
The statement provides insights into the organization's cash balances. It works as an invoice for the products and services being used on an organization's bank accounts and shows how the balances they're holding are being used to offset their fees.
This information is important for managing liquidity and ensuring that sufficient funds are available to meet the organization's financial obligations.
Many banks offer ECR based on the average balance maintained in the account. These credits can offset service charges, effectively reducing the net banking costs. The account analysis statement helps treasurers track these credits and optimize their usage.
Regular review of the account analysis statement ensures that all transactions are accurately recorded and accounted for. This practice enhances financial transparency and accountability within the organization.
By analyzing the data in the account analysis statement, treasurers can identify and eliminate redundant services and find opportunities to transition from paper to electronic statements and payments, thereby improving overall financial efficiency.
While each financial institution (FI) will format its account analysis statement, there will be some common elements:
Governments and nonprofits engage in a variety of financial transactions, from wires and checks to ACH transfers. Banks charge transaction fees based on the type and volume of these transactions.
Banks will charge maintenance fees for account upkeep, banking portals, and other related services. These fees can vary and organizations need to assess whether they are getting value for the services provided.
Governments and nonprofits frequently leverage cash management services offered by banks. Fees associated with services such as lockbox processing, positive pay, prior and intraday reporting, and other value-add services, are outlined in the account analysis statement.
Now let’s move on to each section of the account analysis statement. While each bank’s account analysis statement may vary, you’ll typically find the following:
The statement information is typically at the top of your document and shares all the information you need for the account and reporting period.
This section details the various fees and charges incurred for the banking services used. These can include:
This section provides information on different types of account balances, including:
Ledger Balance: Helps track the total amount in the account, including pending transactions.
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Incorrect Prices: Charges that do not match the negotiated pricing terms with the bank.
Unexpected/Irregular Volume: Reviewing volume for anomalies can point to new services added unexpectedly, fees that should've been waived, or fraudulent activity.
Duplicate Charges: Fees or transactions that appear more than once.
Reconcile Regularly: Match the account analysis statement with internal records frequently to catch discrepancies early.
Communicate with Your Bank: Address any discrepancies immediately with your bank's representative.
Maintain Documentation: Keep detailed records of all transactions and communications for reference.
Prevent Errors: Regular reviews help identify and correct errors promptly.
Ensure Accuracy: Consistent audits ensure that all transactions and charges are accurate.
Maintain Trust: Accurate records build trust with stakeholders and enhance financial integrity.
Account analysis statements serve as the foundation for comprehensively understanding the range of services you engage with at your bank. By leveraging these statements, you can optimize your banking relationships and ensure you’re getting the most value.
Some strategies for optimizing banking relationships include:
A good strategy to start out with is regularly reviewing transaction types and volumes to identify opportunities for cost savings and efficiency improvements.
Understanding this breakdown is important for organizations to optimize their banking activities and identify accounts that may be exposed to fraud, idle, seeing an unusual change in activity, or even help prepare for a Request for Proposal (RFP).
If you want to secure favorable fee structures or be well prepared for pricing negotiations in an RFP, engage in proactive negotiations with your banks. Establishing transparent communications is key to strong bank relationship management.
This includes creating formal pricing contracts that will lock in pricing for years at a time, allowing treasury teams to have a better idea of monthly bank fees as part of long-term forecasting.
If you’re an organization with multiple banking partners, actively reviewing fees can help compare fees across financial institutions to ensure rates are similar. Cash management technology, like DebtBook offers, can assist with this as statements do not line up across different financial institutions and each statement can be a dozen or more pages.
When you actively manage your account balances you can maximize ECR and minimize net banking fees. This could mean moving funds into an account to ensure fees are fully offset or moving fees held beyond the level necessary to fully offset into higher yield investments.
DebtBook is purpose-built for government and nonprofit treasury teams, providing comprehensive tools to power the efficient management of cash flow and liquidity.
Our Bank Fee Analysis feature, part of our Cash Management solution, allows treasury teams to better understand the fees they are being charged, identify any discrepancies, and ensure balances are being held efficiently to offset fees without excess balances earning zero interest.
The result? During preliminary testing, we helped identify millions of dollars of idle cash that, when invested, could be earning between $200K to $2M on average in interest revenue on an annual basis.
(The on average $200K-$2M per annum calculation is based upon average excess balances identified in operating accounts that could be invested through a daily liquid money market fund returning 5% APY.)
Reach out for a demo today to see how DebtBook can help you unlock strategic cash management.
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Disclaimer: DebtBook does not provide professional services or advice. DebtBook has prepared these materials for general informational and educational purposes, which means we have not tailored the information to your specific circumstances. Please consult your professional advisors before taking action based on any information in these materials. Any use of this information is solely at your own risk.