Virtual Accounts: From Consideration to Action

Implementing virtual accounts offers the corporate treasurer greater visibility over cash flows, simplified bank account management, and streamlined reporting and intercompany funds management. Here is a practical toolkit for successful implementation.
 

1. Define Objectives and Assess Requirements

Before implementation, it’s essential to establish clear goals. Are you looking to simplify your account structure, improve cash visibility, streamline reconciliation, or reduce the complexity of reporting? A practical approach may be to start by reviewing your current bank account setup to understand how accounts are being used. Involve key stakeholders in treasury, finance, accounting, IT and your banking partners in the conversation.

2. Select Banking Partner and Platform

You may also want to speak to several different banks about their virtual account offerings. Not all virtual accounts are created equal. These various offerings may be evaluated based on scalability, technology integration, reporting capabilities, and ability to support payments in multiple currencies. Ensuring the platform can seamlessly integrate with your Treasury Management System (TMS) or ERP systems is a serious consideration. Don’t forget to consider any setup or maintenance fees.

3. Develop a Virtual Account Framework

Design a virtual account structure that works for your business. This could mean segmenting accounts by region, entity, or business unit. Virtual accounts can be utilized to manage receivables from customers and payables from vendors. Creating a hierarchy where all virtual accounts roll up into a deposit account, enabling automated liquidity management may be a prudent path forward.

4. Map Virtual Accounts to Internal Systems

Can your ERP and TMS can link virtual accounts to general ledger (GL) codes or customer/vendor accounts? Update your internal cash management policies to reflect the new virtual structure, and define clear processes for reconciliation, cash pooling, and FX payment management. Develop customized reporting in your ERP or TMS to track cash flows and liquidity in real time if possible.

5. Implement Treasury Workflows

By assigning virtual accounts to orchestrate the management of receivables and payables, the potential for automatic reconciliation becomes viable. Centralize your cash by leveraging sweeps from subsidiaries into a central account.

6. Establish Reconciliation and Reporting Processes

Automate the reconciliation of virtual account transactions using pre-configured rules. Set up dashboards to monitor cash positions and ensure that each virtual account is linked to the correct legal entity or vendor, ensuring a clear audit trail for compliance.

7. Test and Pilot the Implementation

Start with a pilot by rolling out the virtual account structure to a select group of business units. Test the integration with your ERP, TMS, and banking provider to ensure smooth data flow. Identify and track key metrics like reconciliation time, improved cash visibility, and cost savings to gauge the effectiveness of the implementation.

By following these general guidelines, companies can harness the power of virtual accounts to elevate their liquidity management, reduce banking complexity, and optimize cash flow when and where it matters most.

Transaction Banking services are offered by Goldman Sachs Bank USA (“GS Bank”) and its affiliates. GS Bank is a New York State chartered bank, a member of the Federal Reserve System and a Member FDIC. For additional information, please see Bank Regulatory Information.