Managing banking relationships and associated bank fees is no easy task for retailers with stores around the country. But Chico’s FAS found a way to efficiently manage the process and reduce costs by deploying sophisticated bank-fee analysis software designed to help cash managers make better decisions that lead to lower banking costs.
The program, SmartAnalysis from Chesapeake System Solutions, Owings Mills, Md., went live at Chico’s in May 2008.
“Chesapeake’s SmartAnalysis decreased our banking fees by 23%, saving us nearly $300,000 (in year one),” said Jeanne Peaslee, manager, cash management, Chico’s FAS, Fort Myers, Fla., which operates 1,104 stores nationwide. “The software more than paid for itself in the very first year. It’s easy to use, and it identifies exceptions and new charges quickly.”
Like many chains, Chico’s let each of its stores to open a depository account at a bank convenient to its location, resulting in literally hundreds of accounts. (Some were within Tier 1 banks, where individual accounts rolled up into one master corporate account.) Chico’s treasury staff did not have the resources to review so many paper bank statements each month and analyze the charges. Instead, staff could only review the charges for overall reasonableness. No attempt was made to compare charges across banks or analyze volume to pursue discounted fees.
With the downturn in the economy, Chico’s management sought to cut costs wherever possible, and banking was no exception. Its yearly bank fees exceeded $1.2 million in fiscal year 2008 and were growing. Management challenged the treasury staff to find ways to lower bank fees. Chicos’s turned to the SmartAnalysis program, which tracks and analyzes bank fees while verifying information and identifying discrepancies. (The retailer also deployed Chesapeake’s Internet Data Manager (IDM) tool, which automatically collects, validates and organizes bank and credit card data.)
The implementation went smoothly, according to Peaslee. The biggest challenge: identifying each bank’s point-of-contact for securing EDI 822 files.
As to the resulting savings, some of the bank-fee reductions came simply from reclosing accounts that were thought to be closed, but were actually still generating charges.
“We did not have an easy means to scrutinize fees at the account level and did not know we were being charged for accounts we believed to be closed,” Peaslee explained. “Now, with the software, we track our activity monthly and can assure that once we close a bank account it is really closed and not incurring charges.”
The program also revealed that, in some instances, Chico’s was paying special fees it didn’t even know it was paying.
“Chico’s operates on a fiscal year calendar,” Peaslee said. “So, we requested that our bank statements be cut for our fiscal year. Banks were assessing hefty charges to provide this service, and we didn’t know it. We immediately moved to a yearly calendar for bank reporting purposes and now use Chesapeake IDM whenever we need to pull fiscal year balances.”
Before the switch to SmartAnalysis, fee increases sometimes occurred without notification and often went completely unnoticed. For example, one month a bank charged 50 cents as a fee. But the next month the charge was 75 cents. The software identified the difference, allowing staff to find out what happened.
“It helps us stay on top of the banks to make sure they’re not just changing the prices on us,” Peaslee said.
In addition, the system provides valuable information that Chico’s uses to approach banks and seek better fees. In that respect, is has been an important negotiations tool, helping the chain lower its banking costs. Chico’s now focuses on maintaining banking relationships only with those banks offering more favorable terms.
“We know the banks to which we want to migrate,” Peaslee said. “Now, when we open up a new store, we tell the store manager where to open a depository account instead of saying, ‘Use whatever bank is closest to you.’”