The industry has created confusion by using the term ‘virtual accounts’ to describe a wide range of products. Here we aim to demystify the terms being used to describe Virtual Account Management (VAM) or Virtual Ledgers, assess the capabilities available today and in future, and highlight the questions that every treasurer should be asking their Virtual Account Management provider.
What is Virtual Account Management?
There are at least three different types of VAM.
Virtual IBANs for customer-level identification
A receivables only product, enabling straight-through reconciliation (STR) of receipts, segregated by payer. A corporate assigns a virtual IBAN to each paying supplier to increase visibility and decrease Days Sales Outstanding (DSO) through automated reconciliation.
Virtual IBANs for entity-level identification in Receive-On-Behalf-Of (ROBO)
Another receivables only offering, aiding understanding of which underlying legal entity is being paid. A company with a large number of legal entities with many receipts due uses virtual IBANs as part of ROBO set-up, to enable entity level segregation of funds without compromising cash concentration.