Commercial bankers need trusted accountants like mountain climbers need sherpas and mall Santas need peppermint schnapps – accountants can make commercial bankers better at their jobs.
Of course, better is a subjective term with a definition that is fluid and changes with the times. Whereas the best commercial bankers were almost exclusively gauged by revenues and books of business just two decades ago, bankers must now be just as concerned with protecting both their firm and client as well as building business to be considered successful.
Embark recognizes the commercial banker’s need for a trusted, knowledgeable, and reliable accounting partner to help them succeed in today’s demanding, litigious, and competitive marketplace. While we might lack the stamina of a sherpa and are only occasionally as fun as peppermint schnapps, we have a handful of ideas to help commercial bankers fully leverage the benefits a trusted accountant can bring to their business.
Bankers Face Increased Scrutiny
While the financial services industry still swims within the wake of the financial crisis, perspectives have changed for the benefit of firms and clients alike. As a result, bankers require sufficient information from their customer base in order to protect both the customer and the bank with loans of any regard.
Much of that required information is provided by financial statements from potential borrowers in order to determine their credit-worthiness and ability to repay the loan. However, given the lack of uniformity in those statements from client to client, there is no centralized standard that bankers can rely upon in order to gauge the financial health of clients in any consistent manner.
The Problem Isn’t Complicated
Given that lack of uniformity, financial statements received by banks from both current and potential clients aren't necessarily audited or even accurate. Similarly, if the information is even slightly outdated, those statements might not provide a clear and timely picture of the client's current financial health. To further exacerbate the issue, banks often have their own specific reporting requirements and statement formats which client companies aren't necessarily well-equipped to provide.
When this issue arises, it’s usually due to a lack of proper accounting systems or procedures in place by the client to facilitate an automated, accurate process in creating and providing the statements to the bank. Likewise, a client company might not have sufficient personnel to provide the bank the financial statements it requires in a format it prefers or in a timely manner. A 13 Week Cash Flow is a perfect example of such a statement, possibly posing a challenge for a client to provide to a bank given its detail of complicated cash cycles – an exact, resource-consuming endeavor to say the least.
Bankers Should Leverage Accounting Partners
The most immediate benefit accounting partners can provide commercial bankers is an expedited approval process for borrowers. For example, when a potential client is working with a bank, Embark could be used to help reformat or reorganize financial statements to make sure they are in line with bank requirements.
Rather than an audit or even a review, this process is more of a cleanup or inspection than anything else. While sorting through the financials, Embark could also scrutinize the statements to assist bankers in identifying any underlying financial issues that could jeopardize loan viability.
In fact, if a bank cannot initially approve a particular loan, it can refer the client to Embark to clean up the financials in order to re-apply for that loan. Often times, the clients will greatly appreciate the bank's referral to Embark and naturally want to continue doing business with the bank if at all possible.
Let Embark Handle Tasks the Bank Either Can't or Shouldn't
Of course, the overall financial health of the borrower is the biggest concern from the bank’s perspective. For that reason, banks need accurate and timely information, something that Embark can assist with by working directly with the client to assemble financials that comply to a bank’s needs.
Depending on the nature of the relationship with a client, a bank may require financial reports and statements as often as on a monthly basis. Since these are not audited, clients need to develop a system to facilitate an efficient general accounting process that makes the transfer of statements to the bankers convenient, reliable, and punctual. On their own, clients don't always make such a process the priority they should.
Embark Can Help More Potential Borrowers Approved
To use a practical example, Embark can have a significant impact on a bank’s business development efforts. If a bank looked at 100 different loan applicants in the previous year but only extended loans to 20 of them, a closer examination of the 80 that were turned away could be extremely beneficial to the bank’s ongoing business development.
Since bankers are obviously more inclined to resolve any underlying issues to make the deal rather than let them find a loan with a competitor, a bank can refer the client to Embark to assist them in cleaning up, reformatting, or reorganizing their financials. Embark can also keep the bank apprised of the process and greatly improve the chances of the bank winning the business due to an efficient and effective experience from the client’s perspective.
Transition Clients to a New Accounting System
When a bank wins a new client that uses QuickBooks – or even has existing clients that have migrated to QuickBooks for whatever reason – QuickBooks typically won't suffice in meeting bank reporting standards for a variety of reasons.
No matter the accounting system used, however, banks typically set a deadline for new credits to migrate to a new system. This daunting task strains resources for the clients as they have to continue to focus on their normal business operations as well.
Embark can work with the companies to remove most of the intricate and laborious procedures, including identification of the universe of systems that will meet the banks’ needs, helping select the most suitable systems for the company, negotiating the cost of a new system and, of course, implementing the new system.
While banks might give small outfits a bit of leeway in their financial statement standards, that leeway quickly disappears as companies get larger and the opportunity for fraud within those statements increases. To that point, banks may mandate that new clients move away from systems like QuickBooks to solutions more within their preference range, including MS Dynamics, SAP, NetSuite, and others. Aside from assisting the company with identifying and purchasing the most appropriate solution, Embark can also transition the company to the new platform in order to comply with a bank's requirements and ensure that the books can close the following month.
Accuracy and Financials Breeds Confidence
Banks feel comfortable recommending Embark to borrowers and potential borrowers because we provide an extra layer of assurance, accuracy, and reliability in the financial statements while also creating a great benefit to the client. By working with Embark, uncertainty over the accuracy and timeliness of the statements disappears and the chances for a successful business relationship are significantly enhanced.
Like we said up top, we might not be as fun as peppermint schnapps but we definitely know how to get the job done. Embark can make a significant difference to your commercial banking book of business and business development needs.