May 29, 2018

Corporate treasury management: meeting expectations

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Jane Strom-Pedersen

Senior Sales Manager, Tieto

Liquidity is no longer seen as an asset, it has become a strategic resource. Corporate Treasurers not only need to be more proactive and diligent in their cash management activities, they are also required to provide correct and timely management information. As a consequence there is less time available for the traditional back office related treasury activities – therefore driving both enhanced automation and self-service.

At the same time, banks are struggling with challenges relating to inflexible legacy environments and regulatory pressures, which typically absorb up to 80% of annual IT budgets. Both of which make it difficult to manage customers’ expectations – especially regarding real-time reporting. 

Corporate Treasury departments need an instant and holistic view of their cash positions in order to monitor and manage working capital and risk more efficiently. However, this is easier said than done, especially if the Treasury department is running hundreds or even thousands physical bank accounts, with multiple banking relationships and across a multi-national corporate structure.

So how can banks meet their corporate customers’ expectations?

Introducing virtual account management (VAM)

Tieto is a software supplier headquartered in the Nordics, so what comes next probably won’t surprise you: we think that the solution is digital, enabling both automation and self-service.

As one of several customer propositions, Virtual account management (VAM) enables a self-service option for corporates that puts their treasury departments in control. Acting as a flexible, virtual overlay, it can sit on top of back-end legacy systems, leaving them largely untouched, and enabling quick, low risk and cost-effective implementations.

What VAM offers

VAM allows the empowered corporate treasury team to open and close virtual accounts on a self-service basis, without engaging with personnel at their bank. Virtual accounts can be opened and linked to a limited number of physical accounts, through the existing banking channel. This makes account management instant, effective and more cost efficient.

This transparent management of account structures enhances multi-entity liquidity visibility and control, while enabling performance tracking and effective decision making based on real-time information. Inter-company cash management, virtual-to-virtual transfers and inter-company lending enhance operational synergies and cost reduction.

VAM accounts held in other financial institutions can also be shadowed. This enables the Corporate Treasury to view multi-entity account positions and transactions, in various financial institutions, in a single consolidated view. 

Forecasting daily balances is a major task for the Corporate Treasury. Accurate reconciliation of incoming payments is an important in order to ensure that the forecast is correct. VAM can be used to set up virtual accounts on payer level (or even invoice level), enabling a fully automated reconciliation process, with enhanced reporting to ERP solutions.

With this approach, the payer will have a unique account to credit, as the account information cannot be lost in the clearing cycle; the account number information can be used for reconciliation process thus improving the reconciliation ratio. This will save money, both in terms of work effort and improved forecasting.

As an alternative to published account number identifiers, VAM also includes customer-defined, rule-based features for “intelligent routing” of payments to virtual accounts identified by simple references.

For more information

If you have corporate treasury clients who would benefit from virtual account management, or want to find out more about other use cases, please contact me, Jane Strom-Pedersen.

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