The findings of the survey by East & Partners late last year that 71% of SMEs did not have a dedicated banking relationship manager prompted me to reflect on the mixed experiences my own clients have had with their banks in recent times.
Let me preface what follows by saying how well we, as accountants, understand the conflict between profit and service standards when it comes to servicing the small end of the market – the businesses which most need our advice and can least afford it.
We have seen over the last few years of economic buoyancy some aggressive campaigns by banks to attract medium to large private business customers; motivated by their appetite for bigger market share to offer seductive ‘sign on’ deals to good businesses with big borrowing capacities.
If only some of this budget had been spent by the banks on nurturing small businesses so they could fast-track growth of these businesses to more quickly become the ideal customers they are chasing. A business that has been supported by its bank since it was small is a loyal customer – not easily ‘bought’ by another bank. These are the customers that gladly sing their bank’s praises and create true goodwill.
I have a small number of clients who have had attentive business banking managers throughout their development from start-up, and they have succeeded in no small part because of this attention. But these really are the lucky ones.
Pity the poor small business owners who have no individual contact point at their banks – much less a business banking relationship manager – who are reduced to having to direct enquiries to the bank’s call centre. Not only do they receive no face to face contact, but not even a name; certainly no advice and no care. If there’s one thing we, as accountants, can provide that is invaluable to our small business clients at very little cost to us, is our network of banking contacts. Often this is the only way these businesses are able to access the attention and facilities they need to grow. They need someone at the bank who can work through the labyrinth of the bank’s systems, understand why their business is different and structure facilities and lending covenants accordingly.
Because, ultimately, it is personal contact that creates the relationship between the business and the bank. After all, to most SME owners, one of the Big 4 banks is much the same as another. What makes the difference is the people at the bank and the care, or otherwise, they give to their customers.
A relationship manager is not just the person selling the bank’s product – it is the person at the bank who stands between the customer and the faceless, scary black hole of bank bureaucracy. Not having a business banking relationship manager is a bit like a blind person negotiating an unfamiliar shopping centre – you know you need something here but have no idea what it looks like or how to get it.
And it’s not just the very small business which gets neglected. I have recently seen some large private businesses left to the mercy of junior banking staff while the bank played musical chairs with the real relationship managers. This makes it almost impossible to get temporary funding increases, or indeed to find anyone in the bank who is capable of making a decision outside the parameters of the existing facilities. Medium and large businesses will often leave a bank whose relationship manager neglects them or who fails to respond to requests for assistance or who simply doesn’t show an interest in the business.
The concept of banks working in partnership with SMEs for the benefit of both sides should be the basis for all banking arrangements. This takes a degree of vision and patience to identify and nurture SMEs, with a view to growing them into large business customers, and a preparedness to perhaps forego part of today’s return on investment in favour of building a strong, loyal customer base for the future. A short-term view not only curtails the financial stability and growth prospects of individual SMEs but also of the entire SME sector and the general economy.
There are obvious parallels here with our own industry – we also have to decide how much effort and investment to make in our small business clients, as opposed to the larger end of the market which can afford to pay us more. I think the big difference is that the accounting sector contains small firms with lower cost structures which are able to service the smaller end of the SME sector. There is no equivalent in the banking sector, which basically comprises a ‘Big 4’ and ‘second tier’, so the SME sector is basically reliant on relatively large organisations for its finance. Having a dedicated business banking relationship manager is the means by which an SME is able to positively interact with these organisations; it allows the SME to put its case forward, to have its business understood and to negotiate the best possible financing structure. Without a dedicated business banking relationship manager this is almost impossible.Sue Prestney FCA is spokesperson on SMEs for the Institute of Chartered Accountants in Australia.