OUTCOMES
- We worked directly with the banker at their main syndication bank (their top lender) and showed our findings.
- The information showed the banker that there was a lot more liquidity to gain (new deposits for the bank) if they are capable of providing:
- Consistent pricing taking into account the massive volumes
- A beneficial credit interest arrangement that accounts for their working capital minimum balances- which are extremely valuable to the banker
- We repeated the process with the second syndication bank.
- Both bankers came through with much better pricing on both the fees and credit interest.
IN SHORT
This mandate cost the client approximately $25,000 in time & material and netted approximately $2,000,000 per year in savings/credit earnings in total.
CHALLENGES
- One of the largest insurance groups in Canada was dealing with the repercussions of its decentralized structure:
- Cash was held between 2 banks, spread between approximately 20 business entities
- The business entities were negotiating pricing (fees) and credit interest individually which led to inconsistent and disadvantageous deals, unbeknownst to any party (banker and client)
- No one in the company within the treasury department had enough banking knowledge to recognize the inefficiency.
- Furthermore, any potential SME had very little time to dedicate to the investigation and calculation.
ACTIONS
- Sierra Consulting began the investigation by working with finance leadership in order to uncover the full banking footprint.
- Reviewed all compensation statements, along with corroborating bank statements to determine the amount of fees paid.
- We recovered the price list for each business unit (BU) to uncover all discrepancies in pricing between.
- We did the same for credit interest rates over all their accounts (approximately 300 accounts, held between the two banks).
- We outlined their cash management habits– for incoming and outgoing cash, and what methods were used for each BU.
- We also established their yearly cash trends to determine their ”peaks & valleys” in their cash levels and identify the overall working capital sum.
- An analysis was performed by Sierra Consulting, using all of the information collected to estimate how much could be gained in opening a discussion with our banker.