Banking partnerships are not just about numbers

Maintaining a strong relationship with the bank is a key responsibility of any finance director. It may seem obvious but it is neglected all too often despite it being a good source of clients with the potential
to become a trusted part
of your team.

Choose your bank and its team carefully. I have found no substitute for meeting potential relationship directors and talking about the legal market, nationally and locally. This is a useful way of learning how much they know about our business and, therefore, how likely they are to understand our firm, opportunities and issues. It’s also a good way of setting the performance of our
business in context.

Many banks have teams of relationship managers and directors who specialise in the legal sector. Clearly this is an advantage for both sides as
they are much more likely to understand a law firm as
a business.

Having chosen a banking partner, the relationship
may be fostered in a number
of areas:

• First, the bank appreciates clear budgets that identify the main operational areas and KPIs, and show how the business is performing. Just as external investors back those teams who have a coherent plan and method of delivery, banking relationship teams will gain trust and confidence from legal management teams who demonstrate these skills.

• Second, give the bank a monthly overall profit and loss, and balance sheet, with comparisons to budget, as well as a cashflow and, most importantly, a commentary that demonstrates why the business is performing as it is.
• Third, which is crucial, don’t hide bad news. Show both an awareness of any issues and prompt action to address them. Be honest about any challenges and demonstrate commercial acumen by explaining how you are addressing these hurdles. Most businesses encounter challenges of varying magnitudes from time to time, and law firms have had more than their fair share over the past few years. Banks expect their customers to have issues and to manage them professionally.
• Finally, don’t assume that the bank is interested in numbers only. It is much easier for a relationship director to sell a proposal to credit if they have visited your firm and met a range of people in the team, thereby better understanding the firm culture and reasons for its success.

Early start

It is also important to involve the bank early in any major project. It would need to understand a change in corporate structure, say from an LLP to a group of limited companies well in advance, to enable them to assess the impact of such a proposal on any security they hold. There could be a significant risk of delays while the bank becomes comfortable with the new structure, so late engagement could even lead to the project being abandoned, with significant wasted costs.

The trend of considering mergers also has an impact
on a banking relationship. Again, a clear approach at an early stage helps all parties to understand and consent to
the proposed merger.

If done properly, a firm
has the opportunity to ask
at least two banks to pitch
for the work for the enlarged firm, on favourable terms, compared with the
previous arrangements.

A delay in telling the bank about such transactions could stall progress or even a failure
to complete.

Our relationship with NatWest has developed from a secondary source of project finance to our main clearing providers for the past few years.

By treating them as a partner and keeping them updated regularly, they have understood our plans and proactively assisted us with a range of projects, from expanding one business area to investment in
a new case and practice management system.

This has been a positive return on our investment of time and effort in helping the bank to understand us. SJ

Stephen Chalmers-Morris is practice manager and partner at Gorvins solicitors