Ways credit unions and community banks are wasting money
Credit unions and community banks waste millions of dollars every year. The easiest, fastest way to stop wasting your money is your vendor management program.
As a part of this series, Maple Street’s pros explore ways your institution could be wasting money and what you can do to fix the problem.
Wasting money mistake #628: No planning
Everyone’s busy. Everyone’s too busy. There’s always more to do than you can hope to do. Undertaking tasks to make needed changes are often difficult to schedule because there’s a limit to the amount of change that can be accomplished at any point in time, and the ability to change is dependent on your appetite and capacity for change.
One of the problems from being too busy is the inability to pay attention to important details that can easily be put off to another time. The best example we’ve seen of this is putting off evaluating existing vendors and considering renegotiating your contract with those vendors.
We have seen many instances where credit unions decide they don’t have the time to undertake a project to renegotiate a contract or to consider changing a vendor because of all of the work they already have on their plate. After all, the contract is what it is and will automatically renew so you can catch it next time.
The consequence of this decision is that credit unions and community banks often end up wasting millions of dollars of their members’ or customers’ money.
If a credit union puts off the renegotiation of a major contract for a year, that could cost the members anywhere from a few thousand dollars to over a million dollars in potential cost savings. It’s hard to imagine how anyone could be too busy to know that much money was on the line.
At the same time, the simple fact is everybody is “running lean,” and time is a precious commodity.
How to fix this money-wasting mistake
There’s an easy answer to avoid this problem and do a better job of conserving members’ and customers’ money and maximizing investments. It’s called planning.
Credit unions and community banks routinely do strategic planning, taking the time away from work to evaluate a strategic position, competitive positioning and what to do in the coming year to be able to meet its stated mission. But what’s often missing from that equation is an understanding of what to do with vendors.
First, the credit union or community bank is highly dependent on vendors’ performance to be able to deliver its products and meet its service commitments in a way that keeps the institution competitive. Yet, evaluation of vendors’ performance never seems to make it into the strategic plan.
Second, a bit of vendor planning allows the credit union or community bank to look ahead to understand what’s coming in the next three to five years, evaluate both appetite and capacity for change, and plan when the negotiations of select vendor contracts will take place.
Good vendor planning will give the credit union or community bank the time and resources necessary at the right time to be able to make sure that vendor selection projects and negotiations proceed in an effective matter, maximizing the institution’s negotiation power, and being able to negotiate the best price possible from the vendor.
Maple Street’s Vendor Advantage System®
Maple Street has been negotiating with your vendors for almost 20 years. If knowledge is truly power, then we’re truly powerful. We can help build a plan to maximize your negotiation power, balance time and resources, and make sure you meet your mission as stewards of your members’ money.
One tool in our negotiators’ box is the revolutionary Vendor Advantage System®. This system is a
proven advantage in vendor negotiations that ensures you get the contract you need at a price that’s fair. Not only does it reduce expenses and manage risk, it improves vendor performance, so you’ll get exactly what you paid for.