The question of cost accounting for banks offers a large field for study and investigation, and it is impossible in a volume of this nature to deal exhaustively with the subject. However, the broad fundamentals have been touched upon in the hope that the information and suggestions given will be sufficient to arouse the interest of the reader and induce him to make a further study of what is an intensely interesting subject. Every manager should make himself thoroly acquainted with the costs and expenses at his own branch and with the operation of every account, in order that he may find out whether the time spent by himself and the staff in operating each account is compensated for by the balance at credit, or other collateral advantages.

The analysis itself is purely mechanical. The real test is to decide whether an adjustment of the rates should be discussed with the customer, or whether the collateral advantages of the account outweigh any unsatisfactory feature disclosed by the analysis. Business men as a rule are not unreasonable when an issue is put squarely before them. Few would refuse to make some adjustment of an account if they were shown that it was working a palpable injustice to the bank. The tactful manager could take advantage of a favorable opportunity to suggest to a customer slight changes which would place the account on a more satisfactory basis. Various methods are available; the balance might be increased, the exchange rate adjusted or, in the case of a small checking account, a flat rate of fifty cents or one dollar per month could be made.

It is preferable to submit the account to a rigid analysis and thus allow leeway for the consideration of collateral benefits, rather than to make a less exhaustive analysis and run the risk of overlooking some unfavorable feature. After an analysis is completed, consider carefully all the advantages of the connection. The customer's side of the question should also be impartially considered; he may have cause for complaint, and analysis is invaluable in either case. When the results of an investigation indicate unsatisfactory conditions it is generally advisable, unless the unfavorable feature is very outstanding, to defer any action until the fact has been confirmed by a subsequent analysis.

Review

If you were determining whether or not an account was profitable to a bank what factors would you consider?

Of the eight classes of accounts enumerated which are desirable, which are neutral and which are undesirable?

Why is it a bad plan to check against saving accounts?

What elements of expense are incurred in making an exchange charge to a customer? Give an illustration.

Analyze an account so as to show gross earnings and the expense of keeping the account.

What changes would you suggest if an account had proved unprofitable?