Optimising Cash and Liquidity Management with Virtual Accounts

As corporates have become increasingly international, their liquidity and risk management challenges have become more complex. As a result, the role of a corporate treasurer is becoming increasingly strategic, with treasurers now having a far wider range of responsibilities than in the past. In a demanding and shifting business environment, treasurers are therefore looking for techniques and solutions to help them enhance efficiency and solve operational problems. As Jennifer Doherty, Global Head of Commercialisation, Liquidity and Investment Products, Global Liquidity and Cash Management and Mark Evans, Head of Payment Advisory, Global Liquidity and Cash Management at HSBC explain, virtual accounts are attracting increasing attention in this respect. 

Virtual accounts are not a new concept, having previously been used to improve the accurate identification of receivables, with payees being allocated their own individual virtual account number to pay into. The same virtual technique has since been re-used to allow those managing funds on behalf of multiple clients to segregate client money effectively, whilst still holding funds in a single bank account. 

Today, virtual accounts are being re-imagined as ‘Next Generation Virtual Accounts’ (ngVA) and being put to use in new ways to help treasurers solve today’s cash and liquidity management challenges. 

Account management and payables 

Leading treasuries are now looking to virtual accounts to deliver a number of specific benefits in the cash management space. A case in point is reducing the number of physical accounts required to run day to day operations. Obviously, any physical account has to be replaced by a virtual account, but all other things being equal, the administrative overhead required to run that virtual account will be less than for the corresponding physical account. 

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