An account analysis statement is a comprehensive financial document that banks, typically in the United States, provide to corporate account holders, often monthly. It lists the fees for banking services provided to the corporate client and any offsetting earnings credits for deposited funds.

The primary purpose of the account analysis statement is to provide a transparent record of all services rendered, the processes used to determine the fees charged and the earnings credits accrued during the period. This enables organizations to monitor their relationship with their banks more effectively and helps banks demonstrate the value they provide to their corporate clients.

Importance of account analysis statements in treasury management

The account analysis statement assists treasury professionals in many ways:

• It enables treasury professionals to monitor and control banking costs, ensuring they're not being overcharged and that all services billed were actually used.
• It helps treasury professionals optimize their cash management services by showing exactly how their account balances are being used to offset banking fees through earnings credits — vital information when deciding whether to maintain higher balances for earnings credits or invest excess cash elsewhere.
• It allows treasury professionals to compare services and pricing across different banks in order to negotiate better fees and make informed decisions about their organization's banking relationships.
• It serves as an important audit trail, helping treasury professionals track and justify banking expenses to their organizations while ensuring compliance with internal policies and external regulations.
• It helps treasury professionals understand their organization's true cost of banking — both direct fees and the opportunity costs associated with maintaining required balances.

Information found in the account analysis statement

While each financial institution may format its statements differently, all account analysis statements typically include the following information:

• Services provided
• Balances maintained
• Cost per transaction/item
• Transaction/item volumes processed
• Charges assessed
• Earnings credit allowances

Understanding the account analysis statement

These are some common terms you'll need to know to read an account analysis statement:

• Average ledger balance: The sum of all daily ending ledger balances, divided by the number of days in the analysis period.
• Average deposit float: The sum of the daily dollar amount of items in the process of collection, divided by the number of calendar or business days in the analysis period.
• Average collected balance: The sum of all daily ending collected balances, divided by the number of days in the analysis period.
• Reserve requirement: The amount the bank must maintain with the Federal Reserve. In March 2020, the Federal Reserve Board reduced the reserve requirements ratio to 0%.
• Deposit fees: The fee banks charge to cover the cost of federally mandated deposit insurance.
• Service charges: The explicit fees or prices charged for services provided by a bank.
• Available or investable balance: The funds in the customer's account that the bank was able to invest in income-producing assets during the account analysis period.
• Earnings credit allowance: The total dollar value of credit that can be used to offset service charges incurred during the analysis period.

It’s important to note that different banks may not use the same terminology when describing their products and services. Some banks may combine services and fees into a single line item or flat fee, and these combinations may vary from bank to bank.

AFP Service Codes, created in 1986, serve as the standard for identifying balances and charges that appear on account analysis statements. Banks use these six-character, alphanumeric codes to provide uniform references for their services, helping avoid confusion over what exactly your organization is paying for. This makes it easier to spot errors and compare services between banks.

Earnings credit rate

Banks in the U.S. typically provide their corporate clients with imputed interest on demand deposit account (DDA) balances using earnings credit analysis (ECA) systems. The imputed interest is calculated using the earnings credit rate (ECR), which is typically negotiable as part of the initial bank selection process.

ECR is usually determined based on tiers of balances. As balances move above or below pre-agreed thresholds, different ECRs are applied. To reduce the risk of unexpected fees or unused balances at the end of a billing period, treasury professionals should always check that the ECR has been applied correctly.

The following formula is generally used to measure the earnings credit:

EC = CB x (1 – RR) x ECR (D/365)

Where:

• EC = Earnings credit
• CB = Average collected balances
• RR = Reserve requirement
• ECR = Earnings credit rate
• D = Number of days in the month

Bank fees vs. balance compensation

There are two ways in which you can pay for banking services: with fees or by maintaining an excess balance. Choosing the fees route allows you to maintain lower balances, which might be your best option if you can earn better returns elsewhere, or if you need to pay down significant debt. Bank fees are also easier to budget for as you know exactly what you’re spending. Plus, the fees are tax deductible.

Opting to maintain an excess balance allows you to offset your service charges. This works well for organizations that have excess cash from unanticipated deposits or that maintain precautionary transaction balances. Some banks also offer preferential terms on loans to customers who maintain excess balances. Plus, the earnings credits are not taxable, unlike interest from many short-term investments.

There is, of course, a downside to each approach. While you have more control and transparency with bank fees, you are still spending actual cash. With the excess balances option, you could get better banking terms, but you also might be leaving money on the table if better returns could be earned elsewhere. Additionally, your exact ECR is unknown until after the fact, and excess credits are generally not rolled over, though some banks offer special accounts that do.

Banks often prefer that customers choose the fees option because holding onto your deposits increases their liability, which may mean they need to secure more capital to meet regulatory requirements. Also, fees from deposit services are viewed as a low-risk source of earnings. However, some banks prefer the excess balance approach because it allows them to use your deposits to fund loans and investments at higher rates than what they’re giving you in earnings credits.

The option you choose depends on your company's cash position, investment opportunities and relationship with your bank. It’s important to run the numbers periodically to ensure you're using the best approach.

Ways to optimize banking relationships

Account analysis statements can help you develop a better understanding of bank services and fees. With this knowledge, you can optimize your banking relationships to make sure you’re getting the best value.

Here are some strategies to optimize your banking relationships:

Bank fee analysis

Regularly monitor fees and alert your bank to any mistakes. Once you’re monitoring and comparing fees each month, you’ll begin to understand what you should be paying for each service. Then you can create a table of bank rates and compare and contrast each bank’s pricing.

When done correctly, bank fee analysis can reduce a company’s annual spending on bank services by tens of thousands — even millions — of dollars by allowing the company to uncover pricing errors, close unnecessary or obsolete accounts, and discontinue unwanted or irrelevant services.

Learn how to make the bank fee analysis process easier.

Relationship review

Periodic relationship reviews are important to confirm that the service provider is abiding by negotiated pricing and validate the reasonableness of pricing over time. Conduct your bank fee analysis ahead of the review so you can negotiate better fees and rates if needed.

Request for proposal process

Some organizations require the request for proposal (RFP) to be conducted on a periodic basis. Others use it when they’re reconsidering their existing banking relationships — perhaps because they’re looking to simplify or they want to take advantage of new services that their current bank doesn’t offer. Regardless of the reason, going through the RFP process can help you find the optimal partners for your evolving needs.

Learn how to conduct a successful RFP for banking services.

Related Bank Relationship Management Reading

• 2024 AFP Bank Relationship Management Survey Report
• Five Insights on Bank Relationship Management
• What Is the Ideal Number of Banking Relationships?
• Experts Answer: What Matters Most in a Successful Banking Relationship?