How will this change companies’ banking relationships?

Tucked within the hundreds of pages of the Dodd-Frank Wall Street Reform and Consumer Protection Act is Section 627, “INTEREST-BEARING TRANSACTION ACCOUNTS AUTHORIZED.” This section repeals what’s known as “Reg Q,” which prohibited banks from paying interest on demand deposits. One year from the passage of the bill, or July 21, 2011, banks will be able to pay interest on checking accounts. more

A new book, Secrets of The Moneylab, chronicles experiments that companies are using to guide decision-making and boost their bottom lines.

Most companies of any size are well-versed in market research techniques. Perhaps they’ve held focus groups to get participants’ input on a proposed new product or conducted a phone survey to determine consumers’ thoughts on a particular firm’s reputation. However, far fewer test how people actually behave when money is involved. Conventional wisdom long has held that humans act logically to better their own interests and pocketbooks – the rational man theory of economics.

Of course, the past few years have shown that humans often act anything but rationally. A case in point: Companies that made loans to individuals who were likely to default. Go back earlier, to the late 1990s, and you’ve got Internet firms with no revenue and flimsy business plans attracting millions in funding.

These and other, often lower-profile examples, such as sales incentives that fail to properly motivate, cost companies money — often, lots of of it. With this in mind, a handful of businesses are conducting laboratory tests to examine how individuals and groups tend to respond to various business propositions. They’re using the findings of these experiments, rather than just relying on assumptions embedded in forecasts, to guide decision-making. The results show promise in areas ranging from contract negotiation to sales and inventory planning to new product launches. A number of these tests and their applications in business are chronicled in the recently released Secrets of the Moneylab: How Behavioral Economics can Improve Your Business, by Kay-Yut Chen, lead economist with Hewlett-Packard’s labs, and science writer Marina Krakovsky (Portfolio Penguin, 2010). more

Not all doom and gloom

While it’s been an intense few years for CFOs and treasurers, there’s some good news: Their salary increases have outpaced those of their colleagues in other parts of the company. That said, the rate of increase dropped between 2008 and 2009, according to the 2010 AFP Compensation Survey.

In 2009, corporate finance pros saw a boost in their pay checks of 2.5 percent on average. While fairly modest, and far below the 3.5 percent jump in 2008, the increases were about 13 percent above those going to employees in other parts of most companies. The average treasurer took home $171,000 in base salary in 2010, compared to $165,600 in 2009. Directors of treasury and finance earned $128,400 in 2010, versus $125,400 a year earlier. more

A recent report from the Private Capital Markets Project at Pepperdine University shows that both investors and business owners appear to be cautiously optimistic about the direction of the economy, although financing remains tight. About three-quarters of bankers, 55 percent of asset-based lenders, 69 percent of factors, and 53 percent of angel investors forecast improving business conditions over the next 12 months.

On the other side of the table, more than half of business owners, when assessing the past 6 months, said that their revenues had increased, and 63 percent had greater opportunities for growth.

The report, prepared by senior researcher John Paglia, an associate professor of finance at the university, is an exhaustive (150-some pages) look at the deals under way at a range of lenders and investors: bank loan officers, angel investors, factoring firms, and PE groups, to name a few. more