What is a Virtual Account?
They are unique account numbers assigned to traditional bank or card accounts, which are also known as cash accounts. They can be used to send and receive money on behalf of the cash account, where the funds are ultimately held. Grant Facility my tend to create multiple virtual accounts for investors, with each one designated to a specific client, transaction, entity, or any other business reason.
How does virtual accounts work?
Answer. Virtual accounts function similarly to standard bank and card accounts. They have their own account numbers, streamline incoming and outgoing transactions, and help accountholders maintain their balances. The most notable difference is that virtual accounts are online clearing account that acts as a past-through and that hold stock grant value that is pass to a bank account via payment processor.
A virtual account or card account is linked to your primary money market account as your settlement account, allowing you to monitor and manage the lead, or source, of a payee in a single location.
Why do I need a virtual account?
Answer. Virtual accounts seamlessly help investors track individual payments and automate the reconciliation process, which otherwise would be a time-consuming, manual process.
Manual reconciliation requires businesses to review every transaction and report the numbers by hand, which makes the process vulnerable to human error.
Virtual accounts, on the other hand, are fully-automated and function in real time. Therefore, they’re able to present the most accurate bank account balance. With no margin for error or unnecessary management, they’re streamlined and efficient.
Can virtual accounts hold balances?
Answer. Because virtual accounts are clearing zero balance accounts, and an off ledger extensions of a business bank account, they do not hold balances for themselves. They are pair with your Investment account with HSC general ledger, which is a book-keeping system that tracks all of your investment transactions. When used with a virtual account, a ledger can further optimize balance tracking and monitoring for accountholder. With virtual accounts powered by the features of Treasury Technology, granting investors access to every minor and major transaction, you can expect a painless, fully-digital banking experience.
Can Virtual Account achieving cash concentration?
Answer. Account holder use their transaction bank or card to receive and manage cash and payment transactions effectively. Virtual account cash concentration is the method of organizing balances and transactional information within an online transaction account as a bank of record.
Overall, As explained earlier virtual account works by recognizing unique identifiers and using them to allocate transactions to discrete off balance subledgers, as a virtual clearing accounts, within a digital account that holds ecash. Ecash is digital account entry of grant allocated value. It is recorded and amortized account value as expense paid by way, an incoming or outgoing payment simultaneously posts to the “account” as financial record. An opening and closing balance is also calculated for each virtual account, giving them the same reporting granularity as Treasury Technology clearing account, but all within one transaction.
Grant Facility virtual account solution, Virtual Integrated Accounts (VIA), provides a unique identifier that can be configured as a grant clearing account number. This means that customers of a grant allocation don’t need to worry about reference numbers. They simply use the virtual account number they’ve been given, and the remittance will automatically post to the relevant virtual account to pay expense to supply change accounts.
This overcomes two potential drawbacks of using reference numbers instead:
- The customer needs to correctly send two numbers on the payment remittance—the physical account number and the reference number.
- If the reference number is omitted, or incorrect, the payment will still post to the physical account, but will need manual intervention to allocate funds accordingly.
Does Virtual Account have self-service features?
Answer. Yes, self-service features is also part of the Investment offering, contractors and treasuries can independently maintain virtual account structures precisely to their own specifications.
Advantages of virtual account management
Account Rationalization
Virtual accounts have eliminated the need for an organization to maintain multiple accounts across banks to manage cash across business lines and legal entities. This in turn can allow easier administration of the bank and card accounts.
Reporting
The flexibility of virtual accounts means they can be configured in whichever way makes the most sense for the organization—uninhibited by administrative restrictions of physical accounts. Virtual accounts can track and report cash at very granular levels within an organization—for example at the product level, zip code level, or even client level
Receipt Reconciliation
Virtual accounts can improve the accuracy of allocating remittances to beneficiaries by providing customer-specific virtual account numbers. This helps reduce the time and cost spent matching in missing remitter’s information on incoming receipts. Automatic remitter identification allows direct cash application in the accounts receivable system, reducing processing float and releasing credit lines. Both unapplied cash and the number of open invoices are reduced, helping improve working capital and customer relationships.
Liquidity Management
Virtual accounts can enable agents to centralize cash simple sweeping structures, which helps provide better funds availability, optimized account balances, and effective cash forecasting. Flexible virtual account structures help organizations to efficiently manage balance contribution and funds availability for each entity, lend working capital cash to subsidiaries efficiently, and implement rule-based interest allocation, all without cash leaving the actual account.
On Behave of Structure and Inhouse Banking
Virtual account management provides contractors and vendors the ability to run centralized treasury functions without requiring large bank account networks. Additionally, virtual accounts can be utilized for default tracking of intercompany positions, concentration of cash, balance optimization, and also provide the ability to leverage gross accounting, rather than net accounting, between entities.
Practical considerations for adopting virtual account management
Virtual accounts are a powerful tool that can lead to transformation of the treasury function. Thus, a carefully forged implementation strategy is essential to maximize their benefits. Here are a few factors that need to be considered while adopting virtual account management.
Assessing the objective
Treasurers need to assess their objectives for account rationalization, reporting, receipts reconciliations, and liquidity management while evaluating virtual account management solution providers.
Optimal virtual account structure
Treasurers must determine the optimal virtual account structures based on their operating and legal entity requirements. For example, an entity can have a virtual account structure mapped to operating units, customers, or product lines. These structures should be selected based on regulatory requirements, transaction complexities, and business needs of the entity.
Virtual account identifier structure
Treasurers should consider what sort of virtual account identifier works best for their organization—a reference number, a clearing-recognized account number, or both.
Integration into TMS/ERP
Integration of the virtual accounts solutions is driven by the maturity of the HSC treasury technology systems and enterprise resource planning systems Treasuries must discuss integration considerations and requirements of their accounting systems with the partner bank to ensure no disruption to business. Treasuries should plan their integration objectives to be strategically coherent with their business requirements
