A well-structured and integrated in-house bank (IHB) can drive efficiencies and cost savings for your entire organization. It goes beyond the treasury function and should be considered essential to a comprehensive financial management model. Many well-managed organizations have the required tools and technology in place; however, they lack the guidance to implement the organizational changes required to support the IHB.
At its core, an in-house bank should offer services comparable to those provided by external banks. This allows participating subsidiaries to streamline and standardize treasury operations while gaining bank independence. Additionally, it provides organizations with benefits in cash flow visibility and risk management, both domestically and globally. An in-house bank can drastically improve operations and provides a true return on investment.
When organizations are faced with uncertainty, many look to improve working capital. Although working capital improvements have always been an opportunity for treasurers to find cost savings and efficiencies, the pressure is on (now more than ever!)
Why implement an in-house bank?
The concept of an in-house bank is not new. Most large organizations that actively manage many subsidiaries, implement some form of internal banking. However, organizations fall short of reaching their full potential when it comes to true in-house banking.
To truly find value in in-house banking, an organization must have a clear understanding of its banking relationships across all its subsidiaries. It must also understand the relationship between its subsidiaries. Surprisingly, this is not always as transparent as one might think. Additionally, it must have complete visibility of cash activity and be able to comprehensively forecast that activity.
An in-house bank also requires organizations to consider their operational structure globally as well as regionally. It requires a stronger approach to centralize treasury operations by implementing Global/Regional Treasury Centers. At a high-level, an organization will see improvements in the following:
- Cost Reduction
- Efficiency & Productivity Gains
- Hard Financial Benefits
- Strategic Benefits
- Compliance & Controls
- Fraud Prevention
But these can only be achieved by taking the proper tactical steps to build an operational foundation.
Elire’s recommended next steps:
As a Trusted Advisor, Elire has helped its clients navigate the complexities of an in-house bank by setting a strong foundation that goes beyond evaluating the technology that is being leveraged. A foundation must start with a truly comprehensive evaluation of your current business processes. Taking a strategic approach to assessing treasury operations is critical to successfully identifying the benefits that can be gained. We can accomplish this by asking:
- Have your current business processes grown organically over time and do they follow leading industry practices?
- Are your business operations changing or getting more complicated at a pace you can no longer keep up with?
- Have shifting strategic priorities led to a misalignment of organizational policies and procedures?
- Do your employees have the right tools and skills to perform within the process design?
At Elire, we’re here to help assess these questions and considerations as you evaluate a move to the underutilized though highly useful in-house bank system. Our Treasury Management Services Team works to identify the best approach for you based on the unique qualities and attributes of your organization. For more information on how our Treasury Team can help your organization, visit the Treasury Management Services page of our website where you’ll find an overview of our expertise. Also available for download is our IBH informational whitepaper, “In House Banking – The Divergent Shift from Traditional Banking”.