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The Rules of Management Have Changed
Long gone are the days when a bank could rely on monthly Excel reports or multiple sources to gain insight on its finances and data. New technology can improve management capabilities and increase profitability.
Today’s consumers are becoming more cognizant of their finances. Their desire to know more about account activity and, as a result, better manage their money has led to a demand for personal financial management and online financial management tools. These services provide a means for consumers to reconcile finances that have become extremely fragmented, and now is the time for community banks to take a lesson from them and do the same.
Both PFM and OFM tools typically provide a centralized dashboard that not only aggregates data in one place, but also visually presents it in a meaningful and actionable way. There is no excuse for banks to not have the same reporting internally. With today’s rates, volumes and tight margins, knowing where a bank is making money is rivaled only by knowing where it is losing it, and being able to act on this knowledge instantly is a matter of survival. Community banks must leverage advanced data management tools to be fully aware of all of their key performance indicators, and then have the ability to seamlessly monitor, analyze, plan and execute optimal business decisions accordingly.
CEOs, financial analysts, sales managers and other community bank personnel are accustomed to managing their institutions from a high-level spreadsheet report on core data, or detailed siloed reports, without any integration between the two. Such segmented views need to become a thing of the past, replaced with more intricate analysis available through a single sign-on. The technology must integrate seamlessly with a bank’s core platform and accommodate data sources from different systems and platforms, enabling timely and accurate budgeting, forecasting and financial reporting. The goal of this strong reporting and forecasting is simple: The more effectively and efficiently a bank can manage its data (and react appropriately), the more profitable it can become. As an added return on investment, community banks can use the data mining information to improve marketing and cross-selling campaigns.
Community banks should customize which performance indicators they are tracking. Based on the factors that most appropriately help meet their individual goals and business plans, only the most relevant and mission-critical data points to the institution should be included. Additional performance indicators can be added at later times to reflect changing and growing business needs. These should be evaluated for relevance and updated annually at the minimum — possibly more frequently, depending on the timeliness of each bank’s strategic business plan and growth goals. Common indicators can be directed to reflect growth, stability and healthy business proportions, including:
- Loan mix.
- Deposit mix.
- Share of wallet.
- Average household profitability.
- Service quality.
- Concentration of profit.
- Client profitability.
- Officer performance.
- New volume summary.
- New loan volume.
- New deposit volume.
Organizing this wealth of information into a single source is essential for building and developing a solid business plan. However, community bankers should ensure that proper security constraints on the data and its platform are set. Data management platforms must have the proper administrative controls, with permissions set at the document or item level, enabling managers and teams to work collaboratively on appropriate projects. Proper systems are equipped with multi-level accessibility options that will increase internal security features and decrease the cost and complexity associated with site provisioning, management and support.
Community banks are focused on providing consumer-facing PFM and OFM tools and equipping their customers to better manage finances, but ensuring that their internal finances are in order should be a top priority. The truth is that many community banks do not have financial dashboards and are currently distributing reports through email. And, a majority of them still access an enterprise-wide view of their organizations through multiple sources. Integrating these disparate silos and automating the centralization of information will give decision-makers the ability to enhance profitability and overall operational efficiency. It is time to practice what we preach about financial responsibility.
Putting the proper systems in place will, in turn, enable banks to better market to customers — and provide them with offers that are beneficial to both parties. Placing key analytics in the hands of seasoned financial professionals lets community banks quickly evaluate and shrewdly respond to changing market conditions while also better competing with financial institutions of all sizes.
Martin Webster is director, ProfitStars Financial Performance Solutions, a division of Jack Henry & Associates Inc.
Copyright © August 2011 BankNews Media