If your bank outsources core processing, the day the invoice arrives marks the beginning of the lengthy and cumbersome monthly process to “prove” the bill’s validity.
Banks feel it is necessary to “prove” the bill for two reasons:
1. The amount represents a significant portion of the non-interest expense.
2. Bankers “prove” everything that has a lot of numbers representing dollars.
Thank goodness a few vendors price and bill on a simplistic basis that does not require the work of preparing or proofing. A few more have improved over the years, but the rest continue the dreadful practice of pricing and billing with click charges for a multitude of items.
Cornerstone frequently reviews vendor bills in the course of our consulting work. Core system bills can run from 80 to more than 100 pages. Think about it – it must cost a vendor a lot to accumulate, collate, validate and invoice each month.
On the bank’s side, the cost to “prove” the counts and totals is also high. It is not uncommon for a bill to go from department to department as the counts are validated before it finally arrives in the payables department. As the number of items counted and billed increases, the probability of an accurate bill decreases.
So why is it necessary for banks to continue what is statistically a flawed process? The answer can only be that “this is the way we have always done it.” And why don’t vendors consider a more rational way to bill for their services? Clearly they can improve their cash flows if banks don’t have to undertake such a convoluted process to validate and pay their outsourcing bills.
Cornerstone has managed the vendor selection process for many banks. In this process, we are exposed to and model the deal terms of most vendors. We are continually amazed at how this efficient market, priced in very different ways, can yield almost identical costs per account per year. Clearly, vendors know how much it costs to process one account for a bank. The complex pricing is just a way to calculate a value that results in a known number.
The next time your contract comes up for renewal, make bill simplification one of the negotiating points. Yeah, I know sometimes you may be behind and sometimes you may be ahead. But in the end, you will probably pay the same, and both you and your vendor will save money without the hassles of incorrect and complex billing. -cf