Incredibly, cash management (CM) sales continue to be underexploited by many of the commercial bankers selling to small and mid-sized businesses (SMEs). We deliberately use the term “incredibly” for three reasons. First, “cash management” has been a major bank product area for more than twenty years. Second, increasingly, cash management-related activities drive a commercial unit’s bottom line. Third, as a group, the majority of SMEs customers operate with no or limited borrowing need; cash management is their core bank requirement.

We have long believed that banks’ under-penetration of the cash management opportunity is traceable directly to their relationship managers’ (RM) heritage role as the chief credit sales people. Most experienced RMs remain credit-centric; they “grew up” selling credit and are both more comfortable selling and more knowledgeable about credit products than any other area.

 

A few banks have addressed this issue by blowing up the traditional roles and responsibilities of the RM. Banks like Wachovia and BofA have redefined the RM to be a client manager, responsible for uncovering all customer needs and bringing in product experts when required. Under this solutions and customer-oriented model, depending on the customer, credit activities should receive no more focus than cash management or other areas. In fact, one top credit person at a bank that has adopted this model commented, “I don’t care if we don’t make any loans,” his way of saying that non-credit sales were a major focus of his bank.
 
RM credit intransigence

However, relatively few banks are willing to end the RM’s hegemony over credit. Arguments raised include:

 

• “The customer expects the RM to be responsible for credit.” In fact, at banks in which the RMs view themselves as responsible for commercial credit, they usually play an ancillary rather than lead role in credit approval.

 

• “If we change the RM’s role, we will look like just another big bank.” Not true. Greater differentiation from a “big bank” is possible, if the banker focuses on relationship building rather than loan selling. Even “big banks” like Wachovia have high customer satisfaction levels after such a change.

 

• “Credit is the lynchpin of our relationship with the customer.” Conversely, reports by the Business Banking Board, among others, indicate that credit is a commodity product while cash management has increased in relationship importance.

 

Unfortunately, many RMs either do not want to sell cash management and/or do not know the product set well enough to effectively uncover opportunities in that area. Many banks have established training programs and compensation changes to engage RMs in the cash management sales process. They have also created Treasury Management sales staff whose primary role is to support the RM in identifying opportunities while continuing to position the RM as the relationship lead.

 

Continued training, increased incentives, and more support all have had a positive impact on cash management sales. However, bank management seems to be working around the problem, in a Rube Goldberg-like fashion, rather than dealing with it directly, hoping against hope that their RMs will finally “get it.”

 

Direct cash management sales force?

Rather than trying to turn the slow moving RM ocean liner, banks need to consider different and more aggressive approaches to cash management sales. For example, Union Bank of California sells cash management by leveraging a sales force dedicated to that area. While Union management might not put it this way, they seem to have recognized the inherent difficulty in getting a credit RM to change his or her orientation. Therefore, they created a direct cash management sales force; “credit” RMs continue to focus primarily on credit opportunities while cash management personnel operate with increased and direct responsibility for CM cross-sales and sales to non-credit customers.

 

To improve sales of CM among borrowers, many banks have created a tightly managed joint approach: an RM remains responsible for borrowing activity and the CM area is responsible for the deposit/cash management relationship.

 

Banks wishing to increase CM cross sales or jump-start an effort in that area need to evaluate a sales process like Union’s. Obviously, it leads to various organizational, compensation, and ego issues, but the pay off to the bank justifies dealing with them.

 

Three “Rules” for cash management success

Our recent analysis of bank CM activities uncovered three related approaches for increasing the bank’s focus on this area:

 

1. Build a strong CM sales team. At many banks, the cash management sales team, if there is one, waits to be called in by the RM after he/she recognizes an opportunity. Banks need to evaluate the value of shifting the Cash Management Officer’s (CMO) role from product support to product sales.
 
2. Create the appropriate sales support structure within the cash management area. Just as banks are focusing on providing greater leverage to RMs, so must they provide increased support. Our analysis of some of the leaders in the middle market shows that the CM role and the support they are provided differs significantly across banks. 
3. Make the CMO the relationship lead for non-credit sales. Non-borrowers are often largely ignored by traditional RMs. Shifting these accounts to a CMO should provide them with the focus they merit while allowing the RM to further penetrate borrowing accounts. In a perfect world, such an approach may not be necessary, but in many banks it is imperative if strong CM results are to be achieved.