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VAM: A Gateway to Streamlining Treasury Management

VAM: A Gateway to Streamlining Treasury Management

by Matthew Davies, Co-Head of EMEA Product Management, Global Transaction Services, Bank of America Merrill Lynch

Matthew DaviesOver the last few years, corporates have been looking for more innovative ways to reduce cost and streamline their treasury operations. One of the main opportunities that treasuries have been exploring is centralising operations thereby leveraging economies of scale, and at the same time maximising their working capital through a centralised treasury function. SEPA has been a key enabler in assisting companies on this journey; however, as it only eliminated borders for euro payments, there were still additional currencies and challenges that corporate treasurers need addressed. Ultimately, SEPA has been a catalyst for change, making corporates think in a new way about how they could rationalise and centralise their treasury operations and it has enabled other solutions to be introduced to further streamline receivables and payments - Virtual Account Management (VAM).

Before the introduction of virtual accounts, every legal entity within a corporate may have managed a multitude of accounts. With a VAM solution, companies gain the ability to establish a multi-level hierarchy of virtual accounts within their account structure at Bank of America Merrill Lynch that reflects their operations or business relationships. Unique virtual account numbers can be used to segregate payments and receipts per entity, or even per trading partner or customer if more detailed reconciliation is needed. The VAM solution not only opens a unique virtual account but it also hosts the virtual account details (sort code, account number and international bank account number) in a structure that is clearing recognisable.

Corporates can use these virtual account details as the settlement instructions for payments and also provide them out in the market as instructions for receipts. Companies benefit from having more control over the data used for reconciliation purposes. Similarly, for payments being intiated quoting the virtual account number, the details of the virtual account can be carried over into the market, ensuring that the end client or beneficiary has the same level of data. As multiple virtual accounts can be attached to a single physical bank account, corporates have the opportunity to minimise the number of physical accounts they need to maintain while receiving enhanced information.