To get a better deal from their bank, nongovernmental organizations need to be proactive. This means staying on top of what’s out there, learning how to negotiate and seeking strength in numbers.
We spoke with bank officials and the directors and chief financial officers of some NGOs to get the lowdown and gleaned these six pieces of advice:
1. It’s a relationship — make it work for you.
You are a customer and your relationship manager is there to serve you — or at least that’s what the bank told you when it signed you up. So remember that and make full use of them.
“It’s like with any service provider — you’ve got to manage the relationship,” Dougal Freeman, chief financial officer at the Global Alliance for Improved Nutrition, said. “You have to regularly meet with the manager, regularly set out your concerns.”
If possible, sit down with them, or at least call them on the phone, every six months to discuss your evolving banking needs and what they can do for you.
2. Push for better solutions.
Don’t assume that your current way of transacting is the cheapest or fastest way possible.
There tends to be a loose pattern with most NGOs in terms of where they send money and how often. And if your relationship manager gave your account their undivided attention, they could probably pick up on that and seek out cheaper, faster or more efficient ways for those transactions to take place, according to Tim Boyes-Watson, director at Mango, an NGO that trains other nonprofits on financial management and accountability around the world.
“You may think it’s a good idea to send your country office 30,000 pounds ($46,300) every month in sterling. But perhaps using a different currency or routing it in a different way would provide better value,” he explained.
However, they “won’t tell you unless they’re asked,” especially if you’re a small organization, he said. The onus is therefore on you.
“NGOs need to be more demanding,” stressed Boyes-Watson, who through his experience of working with NGOs has encountered “no real proactivity about what [banks] were doing for you as a customer.”
International Alert switched several years ago to a multicurrency account that has saved it a lot of money. It wasn’t the bank however that flagged this option up to it — the charity’s own finance team had to work it out themselves, CFO Mohsin Baluch said. IA now meets with its bank once or twice a year and says this has helped dramatically improve the service it receives.
3. Negotiate a cheaper deal.
NGOs can get a worse deal than corporates in terms of bank charges and services.
This is partly understandable. The volumes for many charities are smaller and their transactions more complex than for similar-sized corporates, meaning banks can’t earn the same margin without charging more.
What should NGOs and charities consider when choosing who to bank with? We spoke with bank officials and organizations' chief financial officers to find out.
There is, however, more wiggle room here than some organizations realize.
“People don’t know how to negotiate,” Freeman at GAIN said. “Even if you’re smaller and you have lower transactions, you can always squeeze a little bit. You can always pick up one or two cents on a foreign exchange deal.”
“You have to push — you have to really ask for it,” he continued.
So try asking your bank to trim slightly the amount it charges for overseas or other transactions. Even a small reduction on regular transactions can mean more money for your mission.
4. Hire financial experts or invite them onto your board.
To negotiate the best deal and manage its banking relationship proactively, an NGO needs access to financial expertise and plenty of man-hours.
While big organizations can afford to employ dedicated finance staff who understand financial management, are experienced at working with banks and know how to deal with currencies in country, many small and midsize charities don’t, Michael Wright, director of communications and membership at Bond, noted.
In this case, try to attract bankers or accountants onto your board, advised Peter Kelley, business development and marketing manager at Unity Trust.
“The financial services sector provide a lot of volunteering support for boards, which I think is very valuable,” he said.
The Charity Commission can help put NGOs in touch with financially savvy board members and advisors, noted Roy Wilson, CFO at CDP.
“There is plenty of opportunity out there to access commercial expertise, even for the smallest of charities,” he explained.
5. Seek strength in numbers
Maintaining a strong relationship with other NGOs can give you more leverage in your banking relationships.
Mango would like to see NGOs’ networking efforts regarding banking evolve into a solid collaboration.
“Is there more we can do to combine our purchasing power, to put more pressure on the banks? Because overall, the sector spends a lot of money,” Boyes-Watson said. “We should demand more effort from them.”
Foreign exchange can represent a huge part of an NGO's financing or banking costs. There are numerous ways to make savings here, but many smaller and midsize organizations are not getting the best deal. Here are 10 questions NGOs should ask to get the best deal from their banks or brokers.
Foreign exchange is one product where charities could have collective clout. There are challenges, however, not least the fact that a single legal entity would need to be created to conduct any transaction, he said.
There would also be less to gain in such a setup for bigger charities, whose participation would be essential to achieve the kind of volumes required for collective transactions to make sense.
In the meantime, however, loose collaborations can also be helpful. So build relationships with fellow NGOs to find out which banks have proved most flexible and responsive for them.
And keep in touch with any umbrella organization you are a member of to share your banking experiences with fellow charities and potentially contribute to any lobbying on behalf of the sector.
6. Forget monogamy.
Although international banks promise seamless service across the world, NGOs operating in multiple locations will realistically need more than one bank to meet all their needs.
With operations in more than 90 countries, GAIN maintains relationships with a number of banks.
“I know from experience that there’s no bank that can provide a global solution,” Freeman said. “You have to have a portfolio.”
Engaging in multiple relationships also gives a charity more clout when negotiating for a better deal — as does a willingness to leave if the service it receives falls short.
“I’m in a fortunate position to sit with a lot of donor money that’s prepaid,” Freeman explained. “So I can say ‘I’ll take my business elsewhere.’”
Even if you are a smaller charity, holding accounts with two or three banks can strengthen your hand, as can shopping around regularly, letting your relationship manager know immediately when you stumble upon a better deal and asking him to match it.
Bear in mind, however, that running accounts with more than one bank will increase the administrative costs — both in terms of man-hours and potential fees — that a smaller organization has to absorb.
But at least remain open to relationships with other banks — and make your current bank aware of where it stands.
Do you have tips on getting the best from banks? Let us know by leaving a comment below.
Helen Castell is a London-based financial journalist with nearly 20 years’ experience covering trade, energy and risk for TXF, Shares Magazine, Global Trade Review, Newsbase, Trade Finance Magazine and other Euromoney publications. At Devex, she writes about development banking, private sector engagement and funding trends. She studied English Literature at Sheffield University and International Journalism at London’s City University, and speaks English, Spanish and Japanese.
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