Calloway Retail: Rebalancing a Nine-Bank Group and Justifying a TMS
Calloway Retail runs $1.1 billion of sales through 41 accounts at 9 banks with no TMS; the ERP produces bank-specific payment files and reconciliation is manual. Bank fees average $78,000 a month and average collected balances are $60 million. Credit is a $150 million revolver, average drawn $60 million at SOFR + 175 bps (SOFR 5.30%), with a 25 bps commitment fee on the undrawn balance, split across 5 banks. Bank A holds 40% of the credit commitment but receives only 6% of the fee and deposit business. Bank B holds 5% of the credit but 28% of the business, and is now asking for a larger hold position at the next refinancing. The CFO wants to cut to 5 banks and buy a TMS at $180,000 a year plus a $250,000 one-time implementation.
1. Analyze the bank wallet and recommend how to rebalance the group at refinancing.
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Build the wallet.
Credit revenue:
- Interest: $60M x (5.30% + 1.75% = 7.05%) = $4.230M
- Commitment fee: 0.25% x $90M undrawn = $0.225M
- Credit subtotal: $4.455M
Non-credit revenue: $78k/month x 12 = $0.936M
Total wallet: ~$5.39M
Allocate it:
| Bank | Credit share | Credit $ | Business share | Business $ | Total $ | Wallet share |
|---|---|---|---|---|---|---|
| A | 40% | $1.782M | 6% | $0.056M | $1.838M | 34.1% |
| B | 5% | $0.223M | 28% | $0.262M | $0.485M | 9.0% |
Interpretation: Bank A is under-rewarded relative to the scarce resource it supplies - credit commitment - while Bank B earns nearly double its credit share. Most corporate policies allocate operating business to match credit hold, because credit is priced and rationed while fee business is not.
Recommendation: at refinancing, either (a) shrink Bank A's commitment to match the business it receives, freeing hold for banks that will pay for it - likely Bank B if it prices competitively, or (b) award Bank A a larger share of cash management, FX, or card business. Do both directions rather than only cutting banks: reducing 9 to 5 should follow the wallet math, not a round number. Also verify the 25 bps commitment fee and 175 bps spread against a market benchmark before assuming the current group is competitively priced - the rebalancing question presumes the pricing is right.
2. Build and critique the business case for the TMS. Which benefit dominates?
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Line up the benefits:
- Bank fee reduction via fee analysis and account rationalization: 10-15% of $0.936M = $94-140k/year.
- Labor: reconciliation, file creation and inquiry handling, say 1.5 FTE at $95k loaded = ~$142k/year.
- Error, fraud and float: $30-60k/year, hard to defend precisely.
- Account closure: closing ~20 of 41 accounts removes maintenance fees and minimum-balance requirements.
Sum of the "traditional" benefits: roughly $280-330k/year. Against $180k license plus $250k implementation (amortized ~$50k/year over 5 years) = $230k/year, that is a payback of about 2.5-3 years. Defensible, but thin - and this is where most business cases stop.
The dominant benefit is balance-sheet, not fee-based. If real-time visibility and accurate positioning allow the company to reduce average revolver drawn by $10M, the saving is $10M x 7.05% = $705k/year - more than the entire fee-and-labor case combined. That is the number that should anchor the business case.
Critique the case honestly: fee savings are often double-counted (the fee analysis itself can be done without a TMS); labor savings require headcount action, not just "efficiency"; and implementation risk is real - most TMS projects deliver late and the first-year benefit is negative. Recommend staging: implement cash positioning and bank reporting first (fastest payback, lowest risk), then payments and reconciliation.
3. What should the bank scorecard and RFP contain, and what would you refuse to do?
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Scorecard categories, weighted to the company's priorities:
- Credit: hold size, pricing, tenor, covenants, flexibility to upsize (weight highest).
- Pricing and earnings credit: total relationship pricing, not line-item price; ECR vs. hard fees.
- Service quality: exception rates, response times, escalation paths, named service team.
- Technology: API availability, ISO 20022 support, real-time payments, host-to-host or SWIFT for corporates, file formats, fraud tools.
- Financial strength: ratings, CDS, deposit concentration limits.
- Coverage and fit: geographic footprint, industry experience, local rails.
RFP mechanics: include a data room (account list, volumes, balances, payment mix, FX volumes), a common pricing template so responses are comparable, a stated evaluation weighting, and a requirement that bidders price the target wallet allocation rather than the current one. Ask for references at similar size and complexity.
What I would refuse to do:
- Run an RFP purely to extract price from incumbents while intending to stay - it destroys relationship credibility and incumbents price it in later.
- Award on lowest headline spread while ignoring commitment fees, collateral terms, and covenant flexibility.
- Consolidate to the largest hold bank without checking service quality and operational fit - a larger commitment from a poor service provider is not a win.
- Issue the RFP before the TMS decision, since bank capability requirements (API, file formats) depend on the technology roadmap.
Governance: run the scorecard quarterly, not just at refinancing, and report wallet allocation versus credit hold to the CFO so the rebalancing conversation happens before the company is asking for a favor.