Dealing With Your Bank in the Current Climate 1 February 2010

In recent months the economic and financial climate has changed significantly, in what has often been described as "unprecedented times". This has created uncertainty and a difficult trading environment for many Owner Managed Businesses and their Financial Stakeholders. Although many banks have their own problems and constraints, most remain keen to support existing customers and help them through these difficult times. However the bank needs the customer's assistance to do this.

Customers must understand that times have changed and that banks have seen an increase in their own cost of funding. Many have also seen a change in internal approval and monitoring procedures, increasing timescales and information required.

As advisers to Owner Managed Businesses, we believe that it is important that companies stay close to their bank at this time and are proactive in managing the relationship.

The bank requires information to understand the current situation and such information should be the type of information that well managed companies are regularly producing in order to run their business, including:

  • accurate, reliable and timely monthly management accounts
  • short-term rolling thirteen week cashflow
  • updated longer term financial forecasts incorporating profit and loss account, balance sheet and cashflow (and banking covenants if appropriate)

It is important that companies demonstrate to the bank that they understand what is happening in their sector and that they are taking appropriate measures to deal with an ever changing environment. Management needs to present a well thought through and robust strategy. Quality management information assists in this process and differentiates well run companies from the rest.

Our experience is that there needs to be an open relationship with the bank, explaining both good news and bad news, but more importantly demonstrating that the company is dealing with it in a proactive manner. Our role as adviser is to assist our clients in this process and in the development and implementation of the strategy.

By taking a proactive approach and providing quality information, companies may make their situation an easier one to deal with.

CR Corporate Solutions provides a range of services to Owner Managed Businesses and their Financial Stakeholders, producing sustainable long-term improvements in client's profitability, cash flow and shareholder value.

We would be delighted to have an informal discussion to explore areas where we may be able to assist Owner Managed Businesses in their banking relationship.

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