Managers in many financial institutions handle large sums of money. However, a small percentage of this cash is involved in the day-to-day running of the businesses' engagements. Since money is the commodity that facilitates exchange of goods and services, it is necessary for those people handling to be good custodians. Most business organizations prefer to keep their money in banking institutions. This not only safeguards the money from risks such as theft and loss but also ensures that finance managers remain transparent and accountable. Banking services require that customers meet some financial responsibilities. In this paper, focus is on the service model and bank holding balance model as offered by different banks. It explains the reasons as to why the latter model is most preferable than the former model (Kennedy, 2005).
As a finance manager, I find the bank holding balance model to be the more appropriate to meet the needs of my business as compared...
Unlike the latter, holding balance model allows banks to charge a fixed amount of money on the total balance that a business holds in the identified bank. These charges are periodical in nature and can easily be ascertained by the firm that utilizes the banking service. On the other hand, service model allows the bank to charge the business for every service they render. Since banking process is dynamic and continuous, firms employing the latter model will have to meet the expenses depending on the number of services received from the bank. In addition, it is difficult to ascertain the circumstances and the number of times a firm would require the services of the bank. This could result to unnecessary overhead costs which could, otherwise, been avoided with the alternative model (Dlabay et al., 2008).
Several other factors need to be considered before a business settles on the services of a given banking institution.…
