In the past most of us have held our bank managers in very high regard, and wouldn’t think about moving banks unless there was a very compelling reason; in the current atmosphere where bank facilities are becoming difficult to come by, this is probably even more the case.  We think that they hold all of the cards, and we increasingly look towards the annual review with a certain degree of dread.

But this shouldn’t be the case.

Banks are selling you a service in just the same way as any other supplier, and by and large you should treat them in the same way; if you had a contract with a supplier of consumables, you wouldn’t think twice about renegotiating every year, ensuring that you get the best deal for your business.  So why not apply exactly the same principles to your banking arrangements?

So how do we get the best deal?

As with so many issues to do with running a small business, it is all to do with good preparation.  If you take the initiative at the annual review, rather than the usual approach of waiting for the bank to dictate its’ terms to you, you will be surprised at how the situation may turn for the better.  If you prepare yourself as shown below you will be able to drive the negotiation far better, and even get alternative quotes to ensure that your existing bank is giving you the best deal.

So:

• Prepare a cash flow forecast to show your need over the following year,
• ensure that your forecasts are sensible and can withstand scrutiny,
• be clear about the management information that you will produce,
• decide what security (if any!) you are prepared to offer, (how risky is the business?) and
• document these issues so that you can present the information to an alternative bank if appropriate.

The amount of detail in which this is done will vary greatly depending on your experience and need; however even if the forecast is at a fairly basic level, your action of taking the initiative with your bank manager will almost certainly result in a better outcome.