Cash & Liquidity Management
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How Virtual Accounts Respond to Your New Collection Challenges

How Virtual Accounts Respond to your New Collection Challenges

by Guillaume Flies, Global Product Manager Virtual Accounts, BNP Paribas Cash Management

SEPA contributed a major step towards the harmonisation and the standardisation of formats, so corporates should be in a position to significantly improve their collections through greater automation and accelerate the centralisation of their cash. But some challenges are still keeping them from taking full advantage of SEPA, and significantly improving their order-to-cash cycle as a result.

An efficient order-to-cash cycle: an imperative for all finance stakeholders

Although it is a general practice for managers to be responsible for the profitability of their company, they are rarely incentivised on the level of working capital. The impact of bills’ reconciliation on the whole order-to-cash cycle is often under-estimated and cash is not seen as a strategic resource for success. Yet in a financial environment where access to cash and liquidity has been drastically reduced in the last few years and probably will be reduced further in coming years, such considerations must be reviewed in order to re-position reconciliation at the heart of the financial processes, with the following objectives:

  1. A positive impact on the days sales outstanding (DSO) and consequently on the whole working capital
  2. Lower processing costs due to the reduction of associated manually intensive tasks
  3. Better credit risk management 

Even though SEPA has led to the simplification of the collection process for electronic instruments and opened new doors to data exchange, some issues still keep corporates from achieving a high rate of straight-through reconciliation (STR), particularly on incoming credit transfers.