A Winning System: Next-Gen Virtual Accounting for Multi-Currency Collections

Businesses must diligently keep track of all the money inflows and outflows on a day-to-day basis; a time-intensive and complex cycle of monitoring and budgeting. The traditional accounting strategies no longer deliver the efficiency and security needed, a reason why many businesses are looking to digitize their core finance functions. 57 percent of treasurers looking at “transformative opportunities” to reinvent processes. 

All across the world, companies are switching to virtual accounting to protect data from unauthorized access or sensitive leaks. More finance teams are turning towards virtual accounts as a sophisticated route towards reliable, fast, and hassle-free financial management.

What is a virtual account? It is a series of non-physical online accounts or virtual sub-ledgers, assigned to each partner/client/customer, under a master physical bank account. Although virtual accounting is not a new concept, the more recent evolution added several additional benefits to transform transaction banking services. These benefits include:

Real-time Automated Reconciliation

Manually reconciling remittance information with invoices is not only time-intensive but also prone to inaccuracies. With virtual accounts, a payment received is linked with the unique account number of the remitter, this, in turn, allows automated matching and end-to-end payment reconciliation with the payee and invoice. The result is an overall improved alignment that removes guesswork, and nuances of transaction tracking, with clear visibility into money movement across the organization.

Virtual accounts can be further enhanced by infusing automation technology on top of them. For instance, HSBCs virtual account solution infused with Robotic Process Automation (RPA), comprehensively digitized its client’s receivables and secured an estimated 40% accuracy in matching incoming payments with invoices raised. 

Efficient Liquidity Management

Virtual accounts deliver a reduction in the number of physical accounts; the virtual segregation of balances and transactions enables businesses to control cash management with higher confidence. Also, it helps in providing businesses with the extended perks of enhanced liquidity management.

Another overlooked benefit is their ability to facilitate “on behalf of” relationships within entities and centralized receivables processing such as receivables on behalf of (ROBO). Virtual accounting allows real-time visibility of cash which helps businesses to gain a clear understanding of how quickly cash can be accessed and utilized across the organization for functions such as paying salaries, purchasing inventory faster, or unlocking shorter creditor turnaround time.

The multi-currency virtual account goes a step further by offering global real-time business liquidity management in its base currency. It also supports real-time multi-currency payment processing without the costs of maintaining real foreign currency accounts.

An example is JP Morgan’s Virtual Account Management (VAM) solution that proved to be a strategic enabler of treasury transformation for many of its clients. Using a multi-entity multi-currency notional pool with VAM, JP Morgan clients were able to significantly elevate their working capital position and funding management, alongside boosting operational efficiencies and reconciliation accuracies.

Virtual Accounting Can Fast Track Collections

Businesses adopting next-gen virtual accounting will run their collections smoothly and optimize their working capital. By opting for multi-currency virtual accounts businesses, financial institutes, or small business owners can easily receive funds across geographies and convert those funds into a preferred currency. This removes the daunting impact of short-term foreign exchange rate fluctuations; a winning system to support financial performance and success. 

How can Nium help your business?

Nium can help your business set up multi-currency virtual accounts to accelerate the maximization of their full financial potential. For businesses seeking improved reconciliation, trackable and transparent payments data, rationalization of physical bank accounts, and improved efficiencies with integration automation, virtual accounting can be the best use case.

Nium, offers multi-currency virtual accounts for simple, seamless cross-border transactions in a variety of currencies. Live globally across 190+ countries and available in 100+ currencies, Nium’s global network allows for a scalable and flexible solution and customizable capabilities that drive supercharged results for your business.