Virtual Accounts: Nimble Tool Unlocks Opportunities

Corporate treasurers have long sought greater visibility and control over cash flows, which has become increasingly difficult as organizations grow in complexity. Although virtual accounts are not new, they have rapidly evolved into a versatile tool with many opportunities to benefit the modern treasurer.

Benefits to Treasury

Virtual accounts can provide a streamlined way to enhance operational efficiency by reducing the number of bank accounts and simplifying banking relationships. They offer enhanced cash visibility, make liquidity management easier, and simplify payments reconciliation. Offering a scalable, global solution, virtual accounts can additionally support cross-border operations. They effectively enable allocation of funds to subledgers when treasurers need to manage funding across regions or business units. Virtual accounts also enable seamless reporting which helps improve working capital management through liquidity optimization.
 

Simplified Bank Account Structures

By using virtual accounts, corporates can significantly cut down on the number of physical bank accounts they need. This allows precise management of payables and receivables without the need for multiple accounts.

Why it matters: Lower account maintenance costs and reduced complexity in banking relationships. One global firm has reported a reduction of 30-40% in banking costs through a rationalization of its bank account as part of a virtual accounts implementation.¹ 54% of treasury professionals in 2024 indicated their bank account administration and account management functions perform at an “average” maturity level or below.² 
 

Enhanced Cash Visibility

Adoption of virtual accounts can give businesses a clear view of their cash positions across different entities, currencies, and regions. This kind of visibility supports better liquidity management and more informed decision making around investments and funding.

Why it matters: Improved insight on cash positions delivers improved control of liquidity. 62% of treasurers, CFOs, and CEOs believe that cash visibility, enabled by virtual accounts, is crucial for managing liquidity and making informed investment decisions.³
 

Streamlined Receivables and Payables Management

Virtual accounts can be assigned based on the preference of treasury, simplifying payment reconciliation. For example, assigning each customer their own virtual account number makes it easy to accurately match receivables.

Why it matters: Faster reconciliation, reduced administrative workload, and better working capital management.
 

Straightforward Intercompany Transactions and FX Management

Virtual accounts make intercompany transactions more straightforward. Each subsidiary can manage its payables and receivables without needing multiple physical accounts, and foreign exchange (FX) payment management becomes simpler.

Why it matters: Virtual accounts offer simpler intercompany settlements, allowing treasurers to gain visibility of their FX payments.
 

Effective Segregation of Funds

Companies can use virtual accounts to allocate funds to subledgers for specific reporting purposes, such as payroll or capital expenditures, without adding incremental physical accounts.

Why it matters: Streamlined compliance requirements and financial control without expanding bank administration.
 

Detailed Reporting

Virtual account structures offer detailed, customizable transaction reporting. Companies can generate reports for ongoing book-keeping and reporting, ensuring a transparent financial view of operations.

Why it matters: Potential to improve transparency and visibility by providing a more granular level of reporting which may reduce costs associated with financial reporting.
 

Virtual accounts offer a strategic advantage that may be hard to ignore. By simplifying account structures, enhancing cash visibility, streamlining receivables and payables, facilitating intercompany transactions, providing the ability to allocate funds amongst subledgers, and providing detailed reporting, virtual accounts transform how modern treasury functions. The tangible benefits – ranging from significant cost reduction to improved financial control – underscore their vital role in today’s transaction banking landscape.