Banking

Bank notes

In the second of a series on procurement of professional services for independent schools, Simon Shneerson reviews how they can make a better job of managing their relationship with their bank

Banks have been much maligned over recent months, but for most schools everyday banking has continued as usual. Generally, schools enjoy a long-term relationship with their banks which runs smoothly, but your bank could offer you more support than you may realise. In addition, changes in your circumstances – or those of your bank – might trigger a wider review.

At the moment, the desire to borrow money – or the need to – is highlighting issues between schools and their banks: many schools complain that banks used to be happy to lend them money but are now unwilling to do so. To be fair to the banks, it is worth noting that just as there are stronger and weaker banks, there are stronger and weaker schools too.

Three types
Schools generally fall into three broad groups: those that have a strong and sustainable business, those that have a weak one that isn’t, and those that think they are strong but aren’t. Banks have broad experience of assessing risk and, while they may be less risk-averse now than they were a few years ago, their willingness to lend your school money – or not – should be taken as a helpful (and usually free) healthcheck either of your school as a business, or of its business plan. Both could be painfully dubious, even if you think they aren’t.

If you have existing borrowings and your bank is tightening the screw, ask them why. If you need new borrowing and your bank won’t lend you it, take that as an early warning that they probably know something you don’t. Nigel Dickinson of Coutts says that, while no bank will lend to a school that cannot turn itself around, most will discuss and support a recovery plan that is feasible.

Of course, schools are not “normal” businesses and have characteristics that are atypical – the peaks and troughs of termly cashflow, lengthy notice periods before parents can leave, and usually some spare assets that could be sold if necessary. Sometimes, your local bank might get it wrong, so one valuable piece of advice is to make sure you are dealing with the bank’s education specialists as well as the local branch staff. That holds good generally, because specialist bankers will have expertise within the education sector and can give invaluable advice as part of the everyday banking relationship.

What can you expect from your bank?

Security
• All banks are secure, but some are more secure than others.

Services
• Efficient money transmission – paying bills, receiving payments.
• A range of deposit accounts to maximise your short-term cashflows.
• Branch-based support – this may or may not matter to your school.
• Online banking – look for secure, simple, and accessible services.
• Investment advice – perhaps if you have large sums for long-term deposit.
• Credit checks on suppliers – or parents.
• Business advice – banks can offer experience, knowledge, and networking.

Support
• Helpful, knowledgeable staff – an absolute must-have, whether in a branch or a call centre.
• Access to school specialists – can be very helpful, especially if you have loans or an overdraft.

Realistic fees and charges
• Good service costs money.

Of course, while most banks offer the same range of services, the details of how they operate can make a difference to the smooth running of your school. Most bursarial teams are small and extremely busy, so you need a bank that is easy and flexible to deal with. That means deciding what services and what support you need, and then choosing a bank that can best provide them.

An occasional review makes sense, because banks – like all other large organisations – are constantly changing the way they work and the service they provide, and what you signed up for may no longer be what you are getting. How do you compare banks in a world where they are all broadly as efficient as each other? Nigel Dickinson suggests the answer lies in the balance between service (as opposed to services), attitude and cost.

Service
• If you need help, can you get it?
• Do staff know all about schools, something about schools, or nothing about schools?
• Look for people who understand schools in general, and independent education in particular, who appreciate your cashflow patterns and who can help with some of the wider business issues you face.
• How stable are the bank’s staff?
• Does the same business manager stay in post longer than a term, or do you have to constantly re-brief newcomers?

Attitude
• How hamstrung are bank staff by corporate rules and policies? Can they actually do anything for you? Do they do what they say, or do they make complications? One well-known bank recently insisted that all of an educational charity’s trustees should individually re-prove their identity, when the charity was an existing customer and only wanted to open an additional deposit account. Instead, it was able to move the whole of its banking elsewhere, with just a single phone call.
• How easy to use is the online banking service? And how secure – what security and authorisation limits can you request?
• How user-friendly are bank statements?

Charges
• How reasonable are the bank’s charges when compared with the service you will a) receive and b) need?
• When assessing value, separate the cost of the overall relationship, everyday transactions, and overdrafts and borrowing. Ultimately, overall cost and value are what matter most.
• Don’t pay for a level of service you don’t need, and do pay for a level of service you need. If you pay for service, use it.

As with any professional relationship, both sides can do more for and with each other if they maintain a regular dialogue about what is working and what isn’t. Hold periodic meetings with your bank to brief each other on what is happening inside and outside the school. That way, your bank will be able to be more proactive in suggesting things you can do to strengthen your school as a business.

Finally, your bank manager can give great insights into the local business climate, which is where your parents and many of your suppliers are. And don’t forget that s/he will deal with many other business and professional people, so give her or him some copies of your new prospectus to pass on.

Simon Shneerson is a consultant covering all areas of school strategy, business and governance, management and marketing. Simon can be contacted on 01923 283574 or via www.simonshneerson.com. 

Return to Banking