Never ones to accept the status quo, Vanessa Manning and Paul Cuddihy, Deutsche Bank, talk to Eleanor Hill, Editor, TMI, and explain how virtual accounts can fall short of expectations, and the need for virtual ledger management (VLM) to truly transform the way treasurers manage their liquidity.
Box 1: Virtual accounts: a refresher
The term ‘virtual accounts’ is often used (sometimes erroneously) to refer to different solutions that fall under the same umbrella. To clarify, what many banks and treasurers call ‘virtual accounts’ are in fact virtual IBANs.
Meanwhile, the term ‘virtual accounts’ is also sometimes used to refer to administrative ‘subaccounts’ of one physical bank account, usually known as the ‘Master Account’. Under the Master Account, corporates can open, close, and modify as many virtual accounts as required by the business. They can also organise account hierarchies as they see fit. Since the Master Account forms part of the cash management bank’s ledger, this kind of solution is increasingly known as Virtual Ledger Management (VLM).
One of the main benefits of VLM is that cash can be earmarked as belonging to a particular virtual account. This means that corporates can allocate funds without needing to segregate them physically. VLM can also help with overcoming some of the challenges associated with payments/collections on behalf of (POBO/COBO) structures.
Sign up for free to read the full articleRegister Login with LinkedIn
Already have an account?Login
Download our Free Treasury App for mobile and tablet to read articles – no log in required.Download Version Download Version