Efficiency is key in treasury management, not just for your bank but for your customers as well. One area that often gets overlooked - but has significant potential for time and cost savings - is how you structure your Treasury Management (TM) agreements. By simplifying your approach, you can reduce friction, accelerate service adoption, and improve the overall customer experience.
The Case for a Master Service Agreement
Many banks still rely on individual agreements for each TM service, requiring customers to sign multiple documents when adding new services. This process can be cumbersome for both your staff and your customers, leading to unnecessary delays and frustration.
A better approach is to use a Master Service Agreement (MSA), with each specific service covered by a separate Addendum. Under this structure, the MSA serves as the foundational agreement that establishes the terms and conditions governing the relationship between your bank and the customer. Then, each treasury management service - such as ACH origination, remote deposit capture, or positive pay - is simply added as an Addendum to the MSA.
Benefits of the MSA + Addendum Approach
Customers only need to sign the MSA once, instead of repeatedly signing multiple agreements. Adding a new service becomes a quick, streamlined process.
As a customer’s business grows, they may need additional TM services. With this approach, there’s no need to renegotiate terms each time - just sign a new Addendum.
By housing all core legal terms in a single MSA, your bank’s legal team can focus on updates to the main agreement periodically rather than revisiting full agreements for each service.
Structuring Your MSA for Success
To ensure your MSA structure works smoothly over time, consider these best practices:
Set a Defined Renewal Schedule
The MSA should have a clear expiration and renewal period - typically every few years. Addendums should co-terminate with the MSA, ensuring that all agreements remain aligned and up to date.
Require a New MSA When Necessary
If a customer is adding an Addendum within the final stretch of the MSA’s expiration period, it may be beneficial to require a new signed MSA before proceeding. This ensures that all agreements remain current and that your bank’s terms are aligned with any regulatory or operational updates.
Charge Setup Fees for High-Cost Services
Not all TM services are created equal. Some are simple to onboard, while others require significant time and expense to implement. If a service involves high setup costs (such as fraud prevention tools or complex cash management systems), or if it takes several billing cycles to recoup your investment, consider implementing setup fees to offset these costs. This approach protects your bank’s resources while ensuring a fair exchange of value.
Ensure the Right Person Signs the MSA
A seemingly small but critical detail is who signs the MSA on behalf of the customer. Ensure that the signatory has the legal authority to bind the business to the agreement. This can prevent delays, disputes, or complications down the road if an unauthorized person signs the document.
Always Consult Legal Counsel
While these recommendations can help streamline your TM agreements, it’s essential to work closely with your legal counsel to ensure compliance with banking regulations and contract law. The goal is to simplify the process without introducing unnecessary risk.
We aren’t attorneys and this article isn't legal advice – consult your attorney for the proper legal advice in the area of contracts and agreements.
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