Executives & Entrepreneurs
Talking About Money with Your Banker
by Craig Bentley
We are in the business of improving overall performance with better communications. And never is clear and direct communication more important than when you’re talking about money! In the following article, Craig Bentley recommends critical strategies for communicating with your banker or anyone involved in the financing of your company.
1. Establish a Dialogue
Once you have chosen your bank/banker, it is important to immediately begin to create a working dialogue. Communications should be clear and concise. Be sure that the banker understands your current financial and market positions. Provide sufficient detail of your business operations so that the banker can comfortably explain your business to his/her colleagues,especially to those who will be making final credit decisions. And remember to keep your banker abreast of your future plans for the company.
2. Deal with Integrity
You must build a high level of trust with your bank, and, thus, it is very important that you maintain a highly ethical approach to managing your business and when dealing with your banker. Establish clear guidelines for business operations and ensure that all employees follow company policies and procedures. All communications with the bank must be as accurate as possible and presented in a clear manner that encourages understanding of the major business and financial issues involved.
3. Keep Your Banker Informed!
If location is the principal factor in real estate, then “communicate, communicate, communicate” is the golden rule for solid banking relationships.
It is vital that your banker is kept informed on a regular basis about company operations, industry and specific market news, and the company’s sales breakthroughs and setbacks.
For instance:
• Properly prepared financial statements should be completed on a timely basis.
• Prepare detailed budgets and share this information with your banker. As it does for you as a business manager, these will give the banker a yardstick by which to measure current performance.
• It is also important to prepare financial projections. Such projections will give your banker insight as to where you are taking the business and what the opportunities and obstacles will likely be to you achieving these future targets.
Be proactive in supplying this information. You will create a higher trust level, develop your banker’s sense of confidence in you and your company, and establish a stronger dialogue if you are forthcoming with information.
4. Maintain Contact in Good Times and Bad
One of the real stumbling blocks to maintaining a strong corporate banking relationship is the tendency to establish regular communications with your banker when times are good and then run for cover when there is any type of negative variance to plan or an economic downturn.
When your company is experiencing hard times, it is precisely the time when you should be increasing contact with your bank!
Bankers work with companies through all aspects of the business cycle. But they cannot provide support if they are left in the dark. When discussing a difficult situation, be honest and open about the status of the company, the outlook for the business, and the steps that you are taking to address the company’s immediate problems. Your banker, based on his/her experience in similar situations, may be able to provide guidance as to an appropriate action plan and discuss with you possible adjustments to your credit arrangements to improve cash flow.
In short, bankers work with many companies in diverse businesses and industries, and, in doing so, they are exposed to hundreds of different corporate strategies, management teams, vendors, and supply side models. As a result, they are well-positioned to be not an “outsider,” but an integral part of your team. If you develop a good banking relationship, you can tap into that expertise and benefit from their advice.
Remember that your banker is your representative, your spokesperson at the bank. The more tools in terms of information, strategies, and forecasts that you provide, the better equipped your banker will be to “defend” your company and ensure the bank’s continuing involvement and support.
Choose carefully, work constructively, and communicate effectively—and you too can have a banker “in your corner” to help you achieve your business goals!