What to Monitor at the Bank (and Why It Matters)

Monitoring the bank is the other half of cash flow. It is how you stay borrowable, how you stop leaving money on the table, and how you notice a rate change before it shows up as a surprise on the next statement.

This week is a good example. On September 16 the Federal Reserve raised its target range by a quarter point. Large banks, including U.S. Bank here in the Twin Cities, moved prime from 6.75% to 7.00% effective September 17. If your line of credit or variable note is priced off prime, the cost just went up. If your operating cash is still sitting in a near-zero checking account, the gap between what you pay and what you earn just got wider.

Banks do not only care whether you made the last payment. They care whether they would approve you again tomorrow.

That usually means:

• Clean, timely financials they can read without a decoder ring
• Deposits and borrowing in one relationship they understand
• Covenants that are not a surprise at quarter-end
• A line of credit that gets used and paid down, not treated as permanent capital
• No surprises on ownership, guarantees, or extra debt they did not bless

A Federal Reserve small-business credit survey in the last cycle found that most employer firms still carry debt, and a large share of those that borrowed did it to cover operating expenses. Approval rates have been steadier than they were a few years ago, but they are not automatic. The firms that get the call returned are the ones the bank already recognizes as organized.

Covenant dates are company specific. Some lines are reviewed annually. Some measure a ratio every quarter. Missing the measurement date is how a current borrower becomes a technical default without missing a payment. Read the agreement once a year. Put the reporting dates on a calendar. Do not wait for the bank to remind you.

Cash that is sitting there.
FDIC insurance on a business account is still $250,000 per depositor, per bank, per ownership category. Balances above that are a concentration risk, not a badge of success. Many banks and cash-management programs can sweep excess across a network of banks so more of it stays insured. That is a product conversation, not a set-it-and-forget-it default.

The bigger miss is yield. A lot of closely held companies keep months of cash in operating checking because it is familiar. Checking is for paying bills. It is rarely the right place for money you will not need this week. Money market accounts, short Treasuries through the bank, or a sweep the bank already offers will not make you rich. They will stop you from earning next to nothing while you pay 7% plus a margin on the line next door.

Ask a simple question every quarter: what is this cash for? Payroll buffer stays liquid. Tax estimates stay liquid. Extra cash after that should have a job, either earning something or paying down expensive debt.

Debt that is costing you.
List every facility. Line of credit, term loan, equipment note, credit card, owner loan. Write the rate, whether it floats with prime or SOFR, the unused availability, and the next maturity or review date.

After a prime move, variable debt reprices whether you open the statement or not. Fixed debt does not. That is why “we have a loan” is not a monitoring system. You need to know which balances just got more expensive.

Unused availability matters too. A $500,000 line with $480,000 drawn is not a safety net. It is almost fully used. Banks also notice a line that never revolves. If the balance only goes one direction, they start treating it like a term loan and may push you to term it out.

You do not need a new bank every time the Fed meets. You do need to know whether your current bank has a better seat than the one you are sitting in.

Common items owners skip:

• Interest on the operating account vs. a linked money market or sweep
• IntraFi / ICS-style deposit sweeps if cash is over the FDIC cap
• A true revolving line sized to working capital, not a credit card
• Rate floors, unused-line fees, and how quickly a draw posts
• Treasury tools that cut the time money sits in transit (ACH, remote deposit, lockbox)
• Whether the personal guarantee and covenant package still match the size of the company

The goal is not the cheapest teaser rate on a website. The goal is the right structure at a competitive rate with a lender who will still take your call when collections slip.

• One operating account, one savings account, and no one assigned to look at rates
• Excess cash and a drawn line at the same time, so you are paying interest to hold money that earns almost nothing
• Covenant packages nobody has read since closing
• Personal and business cash mixed enough that the bank (and the IRS) cannot tell them apart
• Assuming the bookkeeper’s reconcile means the banking relationship is being managed. Reconciling says the transactions posted. It does not say the facility is still the right one.

1. All account statements, including the line and any sweep or money market
2. The current rate on every floating facility, and the unused availability
3. Deposit totals by bank vs. the $250,000 FDIC limit
4. The credit agreement page that lists covenants and reporting dates
5. A one-page view of cash that is needed in 30 days vs. cash that is idle

If those five items take half a day to find, that is the first finding.

Froehling Anderson’s Finance and Accounting Solutions team works with Minnesota closely held companies that have accounting staff and still need someone to look at the bank the way a CFO would. That means cash placement, debt cost, covenants, and whether the relationship is still earning its keep after a rate move.

If you want a plain read on whether the business is using the bank well, reach out to us. We will tell you what is fine, what is sloppy, and what is costing you.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or audit advice. Please consult with your plan advisor or CPA for guidance tailored to your situation.