A panacea for fixing every treasury problem doesn’t exist yet, but a Virtual Accounts solution comes close!
The challenges that treasurers face have not changed much over the years and include:
However, the methods of tackling these challenges have changed. The good news is that virtual accounts can help with these and other issues. The following explains how.
The power of virtual accounts is that they offer businesses the ability to streamline their bank account structures enabling real end-to-end solutions that are flexible, accessible, and easily integrated with existing systems. They also help facilitate better insight into payments, receivables, and liquidity by providing a detailed view of activities. They do this by concentrating all activity into a single physical account linked by virtual accounts. This then enables reconciliation of transactions at a granular level if required, for example by entity, currency, or client.
Virtual accounts take the traditional account structure to a new level. A virtual account management solution enables immediate liquidity concentration, eliminating the need for physical cash sweep structures. This in turn reduces costs. To illustrate this some banks have indicated that their clients have been able to reduce their physical accounts by as much as 50%.
In addition, virtual accounts enable the segregation of activity under a single, centralised physical bank account, while retaining visibility and reporting required to manage reconciliation and accounting.
Moving from physical to virtual accounts has other benefits including a reduction in the number of accounts that need to be confirmed for audit purposes. In addition, virtual accounts offer greater control of bank account management so that corporates can open, close, or modify as many virtual accounts as needed organising account structures with greater flexibility and without the need for heavy KYC documentation. Placing bank account management in the hands of treasury and with limited involvement from banks is something corporates could only dream of in years gone by.
Virtual accounts offer flexible structures that can be adapted and changed as organisations change. For companies that are acquisitive and require structural changes to their treasury, virtual accounts can be added quickly ensuring that the new entity is contributing to the treasury strategy in as short a time as possible.
Reducing the numbers of bank accounts not only reduces banking costs but also simplifies administration and in turn reduces risk management.
If there is need for greater visibility and control at an operating account level for a regional treasury, then a virtual account structure is the ideal way to manage this.
A virtual account management solution can also seamlessly integrate with a client’s current global platforms which will help with payables and receivables and in particular reconciliation of both and in addition reduce the need for multiple bank accounts per currency. Indeed, speaking of multiple currencies some banks offer virtual account solutions which are multi-bank and offer multi-currency cash visibility. This means that corporates can gain a complete overview of all payments, collections, and cash across their complete banking networks in near real-time including across all their currencies.
Finally, intercompany accounts, users can configure their own virtual account hierarchy themselves, at any level, in lie with their business needs. So, this makes it possible to construct intercompany positions including setting of intercompany interest rates, position alerts etc. This can all be controlled by dashboards, tailor made to the client’s requirements.
The above describes only some of the power of virtual accounts and what they can do to address the demands of corporate treasury clients.
For more information visit: Cash Management Solutions
Get in touch with us to discuss further: email@example.com
Alexandra has an extensive banking and finance background, including operative Cash Management responsibility for local government. In her current position, Alexandra engages in strategic discussions with leading global and regional transaction banks on a regular basis, and keeps a close eye on the cash management market dynamics.