A Request for Proposal, or the simpler Request for information is a process to get information from a selection of banks or financial service providers describing how the bank will provide service to you and what it will cost. The formality of the process can vary depending on the circumstances, but the point is to get comparable information from selected financial institutions so you can make an informed decision about where to establish your banking relationship. The process to create an RFP and evaluate potential candidates can be time consuming. Be sure to leave enough time for the process to complete successfully.
Why use an RFP for Banking Services
The primary reason for creating an RFP is to get a set of relatively comparable proposals from banks that you might want to work with. Having consistent information allows objective comparison of the banks. Include a request for soft information like the history and philosophy of the institution to help determine fit.
Less obvious, creating an RFP requires you to think through the services that you want to receive from your financial institution and document them in a coherent manner. Think of it as a strategic planning session over your financial operation. What current activities would you like to transfer to the bank or create automatic links for? What third party services might improve cash flow or processing? To put together the proposal you need to determine what services you want and how you want to be treated. It is sometimes hard to remember that banks are sales organizations as well and want to earn your business.
Getting Started
Decide if you want or need a committee to oversee the process. This may involve ownership, accounting leadership and/or accounting leads that directly interface with the bank, fund managers, and inventory specialists. If appropriate you may want to consider IT and legal involvement.
Next, determine what you want out of the banking relationship. Define the products and services and the type of relationship. You may find it valuable to hold preliminary meetings with a few of the banks to get an idea of the breadth of services that can be brought to the table. Products you are not aware of may impact your direction.
There may be strategic objectives as well as operational reasons to engage a different financial institution. Are you outgrowing your bank, need services that they do not offer, or want a different relationship structure? Be sure and evaluate your existing and potential future needs. Changing banks is a lot of work.
- Deposit products and services include deposit accounts, sweep arrangements, zero balance accounts, remote deposit, online access, funds transfer, ACH, positive pay, bill payment, integration with other software packages and credit card services. These may be handled by different departments in the bank.
- Loan products include lines of credit, term loans, SBA loans, corporate card management, mortgage loans and others.
- Additional products such as investment and trust management may be available along with insurance and others depending on the institution.
- Terms and conditions to consider include specific controls or procedures that you want enforced on the accounts, details of the various services you are requesting, required product interfaces and others.
- Identify areas where you can use new or different banking products to improve transaction flow and process within your organization.
Preparing the RFP
Introduction
Begin with a short statement of what you hope to accomplish with the RFP. Include the services you intend to review and acquire, the geographic reach required, terms and conditions for the response from the banks and a timeline. Also list company contacts for questions and indicate if there will be preliminary meetings.
Provide background information on your company. What you do, how long you have done it, how you provide the products and services and who your customers are. Highlight specialties, unique ways of doing business, customer service priorities. Any additional information you think makes you a better banking prospect.
Also include a summary of financial information. This ensures your request gets to the right department in the bank and you get valid information. A very high-level statement of income, margin, balance sheet ratios. If you currently have bank reporting requirements, consider including select information from those reports. Your intent at this point is to generate interest.
Bank Qualifications
Detail your ideal relationship fit. What kind of institution do you want to bank with? Do you expect to have one contact person or several? Set forth or request your expectations regarding the financial position of the bank. Should the bank have the capability to meet all your product needs with internal products or are you willing to deal with third party providers.
Required Banking Services
Detail the bank services that you are requesting. Provide information on the volume and size of the transactions that you will have. Be as specific as you can. The more information you provide the better answer you will receive. Request fee schedules for all services and estimated total cost of the relationship. Request copies of all contracts related to the services requested.
Other
Request a list of referrals that you can contact regarding the bank.
Request detailed information on how they will implement a change in banks. The more your systems are tied into the bank the harder it is to change and the longer the lead time required.
If appropriate attach a list of questions and concerns you have over individual products. Do you have a particular sore point? Request information on how they will make sure it is not an issue going forward.
Provide a timeline. Do you want initial responses and meetings followed by a more thorough proposal or just final proposals?
Evaluation and Selection
When responses are received it is time to review and compare. A matrix in a spreadsheet is a good start. Leave room for comments and impressions about the fit of the bank. Identify and seek answers to questions that you have. Create a short list of candidate banks and ask them in. Review their proposal with them in detail. Ultimately you decide on the bank that best meets your current and future needs.
Implementation
Implementation is a brand-new project. Plan for the implementation process and involve your current bank and the new bank as much as possible. Identify all of your third-party systems that access or refer to the bank accounts. Allow time for a cut-over and allow extra time if there will be any systems involved in the process. You will most likely need to keep the old bank account open for a time.
Evaluating a change in banks can be a time-consuming process that does not fit well within the demands of day-to-day activity. Having a guide to support the process can mean the difference between success and failure. I have years of banking experience and can help navigate this journey.