Growing companies eager to establish a good credit relationship with their bankers often don't pay attention to the costs of noncredit banking services, such as lock boxes, check reconciliation, and control disbursements. That can be a costly oversight, as even bankers will admit. "It is in a bank's best interests to insist on a high compensating balance for noncredit services," notes James Sagner, a vice-president in the First National Bank of Chicago's cash-management consulting division. "But that can be very expensive for a small company. Too often, I've seen worries about jeopardizing credit stop a company from questioning overpriced noncredit services," Sagner says.

In the increasingly competitive banking environment, those fears are rarely well founded.Duncan Oil Co., a $35-million home-heating oil wholesaler and retailer, is a case in point. Four years ago, when the Xenia, Ohio, company started to use noncredit services, its monthly service charges skyrocketed from almost zero to $800. To cover those costs, the bank insisted on a $100,000 balance in the company's account.

Two years ago, Duncan Oil controller Steve Wells finally screwed up his courage and asked the bank for an account analysis statement that broke down the charges. The bank initially was slow to provide it. This is a typical reaction, particularly in smaller communities, where there is less competition, says Sagner. Once Wells received the statement, he immediately opted to pay the service costs rather than keep a high balance. The reason: Wells calculated that by placing money in overnight repurchase agreements and other short-term investments, the company could earn $1,800 a month. And, Wells adds, the company's credit line has remained intact.

To fully understand how much noncredit services cost, small companies should formally review their banking charges at least twice a year, says Sagner. Adds Wells: "Any company can benefit from a thorough look at its bank costs. The bank certainly isn't going to volunteer the information. It's up to you to take the initiative."