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Treasury Management Challenges and How to Solve Them – Part II

Treasury Management Challenges and How to Solve Them

Are you wondering how to deal with your top treasury management challenges and how to solve them? You’re not alone. In this three-part article, I share the top challenges that treasury management officers (“TMOs”) face. I then provide you with ideas on how to deal with each one. In Part I we discussed the top two challenges: waiving fees and the importance of turning Account Analysis System on. Let’s continue with the next three top challenges:

Challenge #3: The Earnings Credit Rate (ECR) is not set nor managed.

Many institutions don’t know how to set the ECR and once set, some institutions don’t monitor nor manage it periodically.

Solution: Once you turn the Account Analysis System (AAS) on, the next step is to set your ECR. There are various methods to calculate the ECR but the calculation based on the 90 Day T-Bill is the most common (when interest rates are low). Some institutions simply assign a rate with no calculation. But you need to monitor and manage the ECR carefully as it is the main driver of bottom-line TM fees your institution receives. The Asset/Liability Committee (ALCO) meeting is an appropriate place to discuss and set the ECR at least quarterly.

The ECR calculates the “earnings credit dollars” a business customer or member uses based on their “investable balances” to offset their account and treasury management fees. If the earnings credit dollars are higher than the fees, then the customer loses the unused credit dollars. If the earnings credit dollars are lower than the total fees, then the difference (or shortfall) is “hard charged” to the business checking account.

Challenge #4: Lack of education and knowledge about the treasury management products.

The three main reasons business development officers (sales team) don’t sell treasury management services and products are: 1) Lack of knowledge of TM products. Bankers are afraid of getting a question they won’t be able to answer; 2) Because they don’t know the products, they don’t value them; and 3) They are not incentivized to sell the TM products.

Solutions: 1) You need to educate the business bankers. But you also need to educate the senior leadership, deposit operations personnel who support the services, and the retail staff on how to make appropriate referrals for TM. Everyone needs to learn and understand the TM products and services. However, not everyone needs to be an expert. The knowledge of how to identify a potential user of TM products is enough to make a referral to the Treasury Management Officer. 2) Education also creates awareness of the value of the TM products. 3) Create an incentive compensation plan for the sales team that includes bringing additional core deposits and non-interest fee income which includes TM fees.

Challenge #5: Treasury Management department (or TMO) reports to retail.

In many institutions the treasury management department reports to the retail side of the institution. This organizational structure creates confusion. Therefore, your business customers or members are not serviced appropriately. You also miss opportunities to cross-sell additional TM products or, in some cases, you may place the small business in the wrong services.

Solution: Change the reporting structure as soon as possible. Treasury Management has two key components: Sales and Operations. Therefore, you have two main options on how to structure the department:

Option 1: The entire TM department reports to Business Banking.

Option 2: The sales side reports to Business Banking and the operations side reports to Deposit Operations. Typically, institutions under $250 million in assets, may need the retail bankers (universal bankers) to open the business checking accounts, but the best structure is to have deposit operations set up all the TM products and services.

We will continue with the next top challenges that treasury management officers (“TMOs”) face in the “Treasury Management challenges and how to solve them” Part III of this article.


Looking for ideas to expand your Treasury Management reach to new business customers? Look into the TMClarity Framework, our comprehensive and transformative training and Treasury Management business management system that leads to greater sales success, higher margins, and increased customer retention in a competitive marketplace.

Books by Marcia Malzahn