Simple Ways to Boost Performance of Your Financial Institution

Regardless of economic conditions or competitive position, every organization should always be seeking ways to improve. Given the intense competitive pressures they face, this is especially true for financial institutions. Following is a high-level overview of eight key areas where financial institutions can often make real and significant improvements to their operations.

1. Technology – leveraging your investment

The plain fact is that most financial institutions are not getting the ROI they should from their technology spend. Ask yourself these questions:

• Do you suspect that the organization is not using the full functionality and capacity of your existing systems?
• Are you struggling to get key systems integrated with each other?
• Have you postponed implementing key functionalities due to lack of time and resources?
• Do you continue to use manual processes that were originally meant as temporary stop-gap measures?
• Are you running outdated versions?
• Has it been more than a couple of years since you last explored outsourcing?

If you answered YES to even one of the above questions, there is likely opportunity to improve system functionality and deliver greater ROI. The fact is that most financial institutions are only utilizing between 25 and 30 percent of the capabilities of their current technology for a variety of reasons. Many organizations suffer from phase 2 syndrome, in which systems with impressive potential capabilities are installed but the training and follow through necessary to fully exploit those tools isn't completed. And, it is difficult to keep up with the accelerating evolution of technology. Server consolidation, cloud computing, mobile technology – all of these can offer real advantages to financial institutions when strategically evaluated and implemented.

Here are some ways to get started evaluating your current technology optimization quotient:

• Compile a list of all of your key technology systems – both those managed in-house and those outsourced to a data center or purchased as a service
• Determine the main purpose of each listed system and determine if there is any overlap among the capabilities of the systems
• Survey system users to see if there is data that they have to re-enter into multiple systems

2. Less is more - improving your expense management

Financial institutions sometimes focus efforts to save money in the wrong areas and end up cutting activities important to the organization's mission or value proposition. This can happen for several reasons:

• Unwillingness to address sacred cows because of internal politics
• Looking at past successes instead of future opportunities
• Following benchmarks without appropriate analysis

Effective expense management starts with a more detailed understanding of your spend throughout the organization. By better understanding how your organization spends money and what is being purchased, you can more easily identify savings opportunities that will have a meaningful bottom line impact. To achieve this, consider these steps.

• Collect and categorize spend data throughout your organization from sources such as accounts payable, procurement, payroll, contracts, procurement cards, and expense systems.
• Identify specific categories of spend that could be reduced without significant customer-facing impacts
• Define and implement specific savings strategies such as supplier consolidation or renegotiation, elimination of non-essential spending, demand or specification management, and tightening of expense policies.
• Track and report hard dollar savings delivered from each strategy, showing the impact by business unit and service line.

In addition, consider longer term expense management strategies to help ensure an objective evaluation and to guard against inefficient expense management based on precedent and inertia. Consider using the phase zero-based budget approach when performing annual budgeting and planning. Each department should start at $0 and will have to justify every FTE and dollar spent when creating their budget. This will help to ensure each department is committed to spend management.

3. More is more – boosting revenue

Managing expenses is vital, but growth still depends on increasing revenue. What can your financial institution do to grow the top line? Here are some ideas:

• Review all prices for products and services on a rolling three-year basis, reviewing a third of all products and services annually
• Compare prices of all core products and services against your competitors at least annually. Increase prices on services prices below market while lowering prices and increasing sales activities on services prices above market.
• Identify opportunities to create products and services that can drive new revenue streams.
• Create revenue strategies that lead customers toward desired outcomes. For example, institutions want consumers to switch from paper statements to electronic statements. So announce a price increase for paper statements to cover postage costs. This will drive some consumers to use e-statements and generate additional revenue from those that don't.

4. Quality – are your measures effective?

Quality matters. But, as with any effort, so does ROI. In today's economically and competitively challenging environment, all financial institutions should ask themselves some hard questions about quality control efforts.

Take the CAMELS rating system. Many financial institutions strive to maintain a CAMELS 1 rating. But can you afford to push for that rating in today's market? The right answer depends on your institution's specific circumstance and goals.

It's important to be able to clearly articulate how your institution measures quality. What objective and subjective measures do you use? How do those measures support your goals? When these measures are laid out, it should be clear as to whether you are measuring the right things and measuring them accurately.

In addition to quality measures, it's important to indicate where you are investing time and resources to ensure quality. If you are investing in services or activities that are already performing at the top end of the quality scale, you might want to consider diverting some of the investment to other, lower performing areas. Ultimately, it's about ensuring those investments are going where they will make the biggest difference.

Here are some quality strategies to consider:

• Focus on baking quality assurance measures into your processes instead of layering quality control steps at the end.
• Create clear, ongoing channels for communicating quality issues throughout the organization and ensure they are raised to the appropriate level of leadership. Review quality measurements and results with leadership at least quarterly to ensure quality issues are addressed and those quality measurements are still relevant and effective.
• Communicate quality success stories internally to employees and externally to shareholders and customers through channels like annual reports and newsletters to leverage the benefits of your quality efforts.

5. Productivity – getting the most from your people

Every organization preaches productivity, but only those with a culture that supports improving it with clear goals, transparent accountability and real rewards achieve the best results.

Start by accurately defining current productivity levels at the workgroup and employee levels. Identify how well they are supporting the mission, goals and objectives of your institution and define the qualitative and quantitative measurements to rate them.

Encourage a culture that questions the status quo in any process. Set clear standards so that all employees know that they must meet defined productivity standards and that they are being measured relative to their peers. For example, tellers can be rated for improved transaction levels, reduced outages and increase in simple sales.

Set multi-year strategies for significant productivity increases for specific workgroups. Strategically target workgroups where re-engineering needs to occur and the highest potential for cost savings exists.

6. Service – focusing on what matters

Effective service is vital to retaining and building customer relationships. But are you focusing on the right services and the right customers? Consider these three questions.

• Most financial institutions have service standards, but do your customers share your impression of your service? What have you done to find out?
• How would an increased or decreased level of investment affect service levels – could you be over- or under-investing in service?
• Are your services focused on the evolving needs of today's market or are they only focused on your historical customer base?

Here are three strategies to help focus your service efforts:

• Be sure that every employee understands the services expectations associated with their position and how they are measured. Those expectations must be communicated clearly and updated regularly.
• Establish clear three- to five-year service improvement targets that directly support your institution's mission and goals by focusing on key markets and that have clear accountability at all levels. For example, set improvement targets for metrics like average products and services per customer, average revenue per customer and customer retention.
• Use service strategies to drive customer behavior in desired directions in areas like e-statement adoption, ATM usage, and online and mobile banking.

7. Business development – growing your future

For many financial institutions, the key to business development is understanding the current market position. Only by understanding how well the current mix of products and services meets customer needs can you make appropriate decisions on where to focus development efforts. Ask yourself these three questions when looking to identify your business development opportunities.

• Are you the primary financial services provider for your customers or a secondary player supporting their needs? What percentage of the financial services buy (aka "wallet share") do you own in your customer base?
• Why are some customers choosing other financial institutions for certain needs?
• How well-trained is your sales force – are they better trained at understanding your products, service and market or at filling out forms and screens?

Develop sales training programs that enhance both product/services knowledge and general sales skills. At many financial institutions, sales people are not even aware of the full range of products and services offered. Consider developing product/service specialists to accompany sales people on calls involving more complex products and high-value targets. This will help ensure that prospects fully understand the features and benefits of your products and that their questions are answered completely and accurately. Create sales objectives and reward mechanisms for the sale of targeted products to boost penetration into key market segments, but be sure to guard against inappropriate responses to those reward systems, such as sales people steering prospects to the wrong product just to boost their numbers.

By understanding your customer wants and your sales team needs, you can most effectively target your future business development efforts.

8. Customer retention – keeping what you have

Every financial institution is looking to increase business with existing customers. Every lost customer represents more than just the business they were already doing with you. They represent all the other business that you could have sold to them. And the cost and effort of securing new customers far exceeds that of building relationships with your current customer base.

The BAI states that the average bank loses 13 percent of their customers each year. The first step in customer retention is to assess the size of the problem. Identify your loss rate and see how it compares to this average. Then dive into those customer losses. Identify the number of services they took advantage of and which services specifically. Ask them questions around why they left and what you could do to win them back.

Once you have evaluated your organization's situation you can better gauge how to improve your customer retention.

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Getting Electricity in Cambodia

Below is a detailed summary of the procedures, time and cost required for a business to obtain an electricity connection for a newly constructed building in Cambodia.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 190 economies. The most recent round of data collection was completed in June 2016.

Procedure

1 Submit application to Electricite Du Cambodge and await estimate

Agency: Electricite Du Cambodge (EDC)

The application should be submitted in person to the Distribution Department of Electricite Du Cambodge. The application should include the following documents: a certificate of property title (a photocopy is sufficient and there is no need for notarization) and a certificate of company registration. The client has to fill a form specifying the power needed and the list of equipment in the warehouse.

There are no official fees for the application. The time for this procedure includes an estimate for negotiation

2 Receive site inspection by Electricite Du Cambodge

Agency: Electricite Du Cambodge (EDC)

The Distribution Department of EDC sends an inspector to check the site and the area. After the inspection the EDC will do the assessment and quotation of the prices.

3 Await clearance from Electricite Du Cambodge and sign contract

Agency: Distribution Department Electricite Du Cambodge (EDC)

The consumer should obtain a clearance from the Distribution Department which has to assess whether EDC has enough capacity. The clearance is issued by the Managing Director of the Distribution Department. Once the clearance is issued the applicant signs a contract and pays fees

4 Await completion of external works, meter installation and final connection

Agency: Electricite Du Cambodge (EDC) and Electrical Contractor

For an additional load of 140kVA installation of a transformer for 160 kVA will be required. The external connection works are carried out by EDC. The meter gets installed at the same time as when the connection is done. If there is a road crossing it takes EDC additional 2 weeks to obtain an excavation permit

The security deposit has to be paid and is returned upon the termination of the power consumption. 

There is no supervision / inspection of the internal wiring before the final connection. EDC is responsible only for the external connection. The customer's private electrical engineer is in charge of the internal wiring. There is no requirement that the electrician must be licensed, so they can practice without a license. However, EDC is de facto the licencor of electrical engineers because they provide training courses. Attendees of this training receive a certificate that EDC recognizes. There is no other agency that provides the courses

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How to Registering Your Property in Cambodia

Below is a detailed summary of the steps, time and cost involved in registering property in Cambodia. It assumes a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 190 economies. The most recent round of data collection was completed in June 2016.

Agency: Land Office (District Level, Office of the Ministry of Land Management, Urban Planning & Construction)The buyer verifies the title certificate with the Land Office, checking for potential liens or encumbrances

The buyer should obtain a copy of the initial title certificate from the seller and verify proper ownership, ensuring that the seller is the rightful owner of the title certificate. He verifies the title certificate with the land office (it is also possible to start this procedure at the Land Department at the Provincial level) to ensure that there are no liens, mortgages or other encumbrances registered for that property.

Official cost according the Prakas 995 dated of December 28th,2012 on public service at Ministry of Land Management, Urban Planning and Construction

Obtain information on the property from the Commune Council Official

Agency: Commune Council

The land purchaser may contact the village chief or the commune council official to obtain information on the land in addition to an official search at the municipal land office. This procedure is not required by law, but it is an additional step to verify that there are no morel liens or other encumbrances affecting the property object of the transaction

The buyer should obtain the certificate of incorporation of the seller’s company and other documents from the seller

Agency: Ministry of Commerce

If the landowner is a legal entity, the buyer should obtain a copy of the ID of the shareholder or person acting on behalf of the company, and a certified/notarized copy of the certificate of issued by the Ministry of Commerce. These documents are needed to verify the accuracy and identity of the company name appearing in the title certificate. A Power of Attorney is also needed, as well as a resolution signed by the Board of Directors authorizing a named individual to represent the company at the land office accompanied by the Power of Attorney implementing that Resolution. This procedure is not required by law, but carried out in practice to verify information of the seller.

Apply for registration at the District Land Office of the Ministry of Land Management, Urban Planning & Construction (MLMUPC)

Agency: Land Office, (District Level, Office of the Ministry of Land Management, Urban Planning & Construction)

When 2 persons/companies wish to buy/sell real property, together they should go to the district office of the Ministry of Land Management, Urban Planning & Construction (MLMUPC) and arrange to prepare and sign documents. The Land office reviews the document, checks the existing land book and sends it to the tax office to calculate the amount to be paid for the Transfer Tax. Before that, the tax office will send their staff to the field to evaluate the property. They have to inspect the property and assess its value. Once the inspection is done, the tax office will ask the buyer to pay the transfer tax.


In order to complete this procedure, a cadastral transfer fee of KHR 600,000 is paid to MLMUPC.


The documentation shall include the company's statute, its Certificate of Incorporation, and Power of Attorney (obtained in Procedure 3). At the time, the original Title Certificate held by the seller must be presented to the Khan (District Level) at the time of signing the deed in order to have the name of the new owner inserted on the document.

Pay transfer tax at the Tax Collection Office

Agency: General Department of Taxation

A transfer tax of 4% of value of the property is paid by the seller to the Ministry of Economy and Finance at the Tax Collection Office of the location of the transferred property. A Tax Receipt is issued to prove that the tax has been paid. The 4% transfer tax is set out in Article 40 of the Law on Finance for the year 1995. In Phnom Penh, this tax is not assessed based on the true transacted value of the property but based on a schedule of price of property determined by the Phnom Penh Municipality. The assessed value is usually based on the total number of square meters, the land's location, use etc. For the land of more than 1200m², the surplus is subject to unused land tax. For the land less than 1200m², the unused land tax is not applicable. The time for the tax office to complete the calculation of transfer tax will depend on the location of the land and its size.

Return to Cadastral office to complete the registration process

Agency: Land Department (Province Level of the Ministry of Land Management, Urban Planning & Construction)

After taxes are paid the parties return to the cadastral office at the MLMUPC and sign/thumbprint a MLMUPC form for buying/selling real property that was filled in by MLMUPC official. The signing/thumb printing will be witnessed by a local authority such as commune chief who will also thumbprint. These Procedures are based on Land Law Arts. 244 and 245. Land Law Art. 69 bars transfer unless all necessary taxes are paid. The documentation shall include: (1) Payment receipts of transfer tax (obtained in Procedure 5)

Obtain the certificate of title from the Municipal Land Office

Agency: Land Department (Province Level of the Ministry of Land Management, Urban Planning & Construction)

The Khan/District land office forwards all the "transfer documents" to the Municipal Land Office where it issues the Certificate of Title in the new owner's name and has it registered. The last procedural step in practice can take several weeks, depending on the diligence of the land officials and interested parties. The Certificate of Title is received at the Land Department (Khan level)

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Cambodia-Withholding Tax

The general withholding tax shall be determined as follows:

• Any resident taxpayer carrying on business and who makes any payment in cash or in kind to a resident paxpayer shall withhold, and pay a tax, an amount according to the below mentioned rates which are applied to the amount paid before withholding the tax:
  • The rate of 15 percent on:
    • Income received by a physical person from the performance of services including management, consulting, and similar services;
    • Royalties for intangibles and interest in minerals, and interest paid by a resident taxpayer carrying on business other than domestic banks and saving institutions to a resident taxpayer
  • The rate of 10 percent on the income from rental of movable and immovable
  • The rate of 6 percent on interest paid by a domestic bank or saving institutions to a resident taxpayer having a fixed term deposit account
  • The rate of 4 percent on interest paid by a domestic bank or saving institutions to a resident taxpayer having non-fixed term saving account
• The withholding in this article shall not apply to interest paid to a domestic bank or saving institution and to the payment of tax exempt income as stated in article 9(New) of this Law.

- Any resident taxpayer carrying on business and who makes any of the following payments to a non-resident taxpayer shall withhold, and pay as tax, an amount equal to 14 percent of the amount paid:

• interest,
• royalties, rent, and other income connected with the use of property;
• compensation for management or technical services that shall be determined by Prakas of the MEF;
• dividends.

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Value Added Tax

The self-assessment regime taxpayers who are making taxable supplies are obliged to register for VAT, and collect VAT from the supplying of goods or services to their customers. The term “good” means tangible property other than land or money. The term “service” means the provisions of something of value other than goods, land, or money. Taxable supply The term taxable supply means: The supply of goods or services by a taxable person in the Kingdom of Cambodia. The taxable person is any taxpayer under the Real Regime Tax System and others as specified by regulations; The appropriation of goods for his own use by a taxable person; The making of gift or supply at below cost of goods or services by a taxable person; The import of goods into the customs territory of the Kingdom of Cambodia. Non-taxable supplies Non-taxable supplies are as follows: Public postal service; Hospital, clinic, medical, and dental services and the sale of medical and dental goods incidental to the performance of such services; The service of transport of passengers by wholly state owned public transportation system; Insurance services; Primary financial services; The imports of articles for personal use that are exempted from customs duties; Non-profit activities in the public interest; The imports or the purchases of goods for use in the exercise of their official function of foreign diplomatic and consular missions, international organizations and agencies of technical cooperation of other governments. Rates of tax The rates of VAT are as follows: 0% This rate applies only to goods exported from the Kingdom of Cambodia and services consumed outside Cambodia. Exports are defined as including international transportation of passengers and goods. 10% This standard rate applies to all supplies other than exports and non-taxable supplies. Calculation of tax due The VAT paid on import of goods or the VAT on locally purchase of goods or services for the business is called “Input Tax”. The VAT charged on supplying of goods or services to customers is called “Output Tax”. VAT due = Output Tax – Input Tax. Non-deductible Input Tax Non-deductible input tax are the VAT paid on: Entertainment, amusement and recreation expense unless the taxable person carries on a business as a provider of entertainment, amusement or recreation; Purchases or imports of automobiles, unless the taxable person carries on the business of dealing in, or hiring such automobiles; or Purchases or imports of certain petroleum products, unless the taxable person carries on the business as a supplier of such petroleum products. The taxable person must file the monthly VAT return in the form prescribed by the tax administration by the 20th of the month following the month that the supplies have been made.

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Cambodia-Tax on Property Rental

Tax on Property Rental

Tax on property rental is set by the rental received as the following: Buildings such as houses, factories, warehouses, offices, and so forth Manual tools are equipped with industrial institutions Industrial and commercial installed fittings established in place, large buildings loaded with liquids and miscellaneous products such as fuel, pitch, grains Floating houses, ships used as accommodations or miscellaneous business services Free land (land without buildings) is included with the areas of stone, mine and coal extraction, lakes and salt pan field This tax is collected from proprietors or assignees The tax rate on the property rental is equalized 10% of the gross rental. This gross rental shall be written in a contract or an agreement with lessees.

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Cambodia-Tax on Salary

Tax on Salary

The tax on salary is a monthly tax imposed on salary that has been received within the framework of fulfilling employment activities. A physical person resident in the Kingdom of Cambodia is liable to the tax on salary for Cambodian source salary and foreign source salary. A non-resident physical person is liable to the tax on salary for Cambodian source salary. The enterprise which is the employer of an employee has the obligation to withhold tax before salary payment and pay this tax to the tax administration by the 20th of the month following the month in which the salary is paid. For a resident employee the tax on salary due is determined on the monthly taxable salary and is withheld according to the progressive tax rate as below: Monthly salary (Riels) Rate 0 - 1,000,000 0% 1,000,001 - 1,500,000 5% 1,500,001 - 8,500,000 10% 8,500,001 - 12,500,000 15% 12,500,001 - upwards 20% For a non-resident employee the tax on salary is withheld at the rate of 20% of the amount to be paid before withholding. . This withholding tax is the final tax on salary for the non-resident receiving the salary. For fringe benefits, every month, the employer shall withhold and pay tax at the rate of 20% of the total value of fringe benefits given to all employees. The value of fringe benefits is the fair market value inclusive of all taxes.

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Cambodia Property Tax Calculation

Property Tax Calculation Example:

An example for property tax calculation on a flat in Phnom Penh was highlighted as bellow: for instance a (7m x 25m) land with a (4m x 20m) flat consisting of Eo, E1,and E2 was estimated in market price by Property Evaluation Committee as below:

 

  

• Land Price​​​​​​​​ = 250USD/m2

• Price for Flat at Eo = 200USD/m2

• Price for Flat at E1 = 150USD/m2

• Price for Flat at E2 = 100USD/m2

Price of the property calculation

• Land Price = 7m x 25m x 250USD = 43,750 USD

• Price for Flat at Eo = 4m x 20m x 200USD = 16,000 USD

• Price for Flat at E1= 4m x 20m x 150USD = 12,000 USD

• Price for Flat at E1= 4m x 20m x 100USD = 8,000 USD

Total Price of Property = 79,750 USD
Total Price in 80% (Riel) = 79,750 USD x 80% x 4,000 Riels = 255,200,000 Riels

Tax Based = (Price of Property - 100,000,000 Riels)
= 255,200,000 Riels - 100,000,000 Riels = 155,200,000 Riels
Therefore the annual property tax for this particular unit = 155,200,000 x 0.1% = 155,200 Riels = 38.8 USD

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