Corporate Payments
Virtual Account Management
The Virtual Account Management (VAM) model has transformed the way cash management solutions have worked so far. This unique model provides an end-to-end solution that is accessible, adaptable, and attuned to market trends. Virtual Account Management (VAM) workflow provides coverage to different industries &scenarios and has been significant in extending support to treasurers to manage liquidity not only realistically, but also effectively.
With our solution, the complexity of maintaining multiple physical accounts can be avoided with the diverse solutions provided by the model, such as easy transfers, claims, and payments that can be recovered per entity or project as per the requirements.
Key Capabilities
Integration Capabilities: The account’s ability to function as an interconnected network of solutions aids the movement of money through different channels, reducing the cumbersome task of reporting and tracking the activity. The dynamic nature of the collections and payments on behalf of (COBO/POBO) models helps in the amalgamation of accounts from different banks, resulting in the allocation of funds and resources, specific to customers’ needs that befits the new-age businesses of the corporate.
Dynamic Account Management Model: The VAM model enables the payer to conveniently allocate a unique account number that facilitates a payment towards services rendered from various parties, without using the real account number.
Coherent Space: Virtual accounts work in cohesion with multiple entities like business operations, payment gateways & clients. The In-house bank function imparts ease of use to the businesses by allowing debit, credit and transfers between the virtual accounts.
Future Enabled: The solution is capable of creating a virtual account that is dynamic in the fullest sense and one which is based on a set of rules, from a pre-allocated one that gives banks the leverage of utilizing the tokenization model.
Consolidated Support: Virtual Account Management (VAM) extensively supports promoting a cluster by restricting the number of accounts required to manage cash across various hierarchies effectively. By organizing and re-allocating balances virtually rather than physically, treasurers achieve the maximum benefit. The benefits include continuous real-time cash inflow and outflow, reducing dependency on the intraday credit and managing transaction flows confluence with the liquidity.
Autonomous Reporting: Virtual Account Management (VAM) provides a customized and detailed overview of the account to avoid any lapse or lag in the reporting of the performance features. The progress can be charted out, giving insight into risk management and increased accessibility to the funds.
Synchronized Automation: Virtual accounts can be easily filtered through the strategy to execute functions in sync with business capabilities entirely. Virtual Account Management (VAM) necessitates the need for streamlined objectives, detailed information reporting, and flawless accounting, crucial to managing collaborative efforts and initiatives.
Progressing & Comprehensive: The continually evolving strategic role of treasury management and the digital transformation of banking have paved the way to the digital transformation of payments collections and reconciliations. With its comprehensive database, the origin, movement, and final accumulation of the funds can be easily traced and updated accordingly. The parameters and components involved can propagate the versatility of virtual accounts.
Virtual Account Management
Virtual Account Management
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FAQs
1. What are Virtual Accounts (VAs)?
VAs are temporary, electronic account numbers linked to a designated “Real” account, typically held by a business or financial institution.
They function as sub-accounts that facilitate specific transactions or segregate funds for various purposes. VAs do not physically hold funds; instead, they act as conduits for directing transactions to the master account.
2. How are VAs Different from Regular Bank Accounts?
Each virtual account provides the same data segregation, balance analysis, and transaction identification as a real account does. However, the administrative cost for opening and managing virtual accounts will be significantly lower than for physical accounts.
In addition, bank fees for keeping up virtual accounts and transferring money between them have to be far less than those for real accounts. When opening hundreds, perhaps millions, of virtual accounts becomes feasible, it would be unimaginable to do so with real accounts.
Businesses are able to autonomously manage virtual account structures according to their own requirements. Simultaneously, the advantages of control, visibility, and reporting that accompany a physical account structure are preserved.
3. What is Virtual Account Management (VAM)?
Virtual Account Management is a virtual system overlay that can be implemented as an overlay on the Bank’s current core banking platform with minimal impact .
It offers enhanced real- time liquidity management services to support complex business operations including but not limited to managing business hierarchies, multi currency receivables and payables
4. How does VAM Work?
VAM operates by identifying unique IDs and allocating transactions to separate subledgers, or virtual accounts, within a physical account. So an incoming or outgoing payment is posted to both the “master” physical account and the relevant virtual account. Each virtual account also has an opening and closing balance, providing the same reporting granularity as a physical account but all within the same account.
5. Benefits of Using VAs:
Virtual Accounts smarter, leaner treasury function, allowing treasurers to concentrate their time on more strategic activities such as managing interest rate and FX risk, forecasting future cash requirements, and provisioning cash for current requirements. Their VIA solution will help streamline and automate time consuming tasks, while making others redundant altogether. Virtual accounts can benefit treasurers in five major ways
Account rationalization
Virtual accounts eliminate the need for an organization to keep multiple accounts at different banks in order to handle funds across business lines and legal entities. This can make it easier to manage bank accounts.
Reporting
Because virtual accounts are more flexible, they can be configured in whatever way makes the most sense for the organization—unhindered by the administrative restrictions that physical accounts have. Virtual accounts can track and report cash at very granular levels within an organization, such as at the product or even client level.
Receivable reconciliation
Virtual Accounts can be powerful tools for streamlining receivable reconciliation, offering several key benefits including
- Automatic Identification by assigning a unique VA/vIBAN linked to the main account, incoming payments can be automatically identified based on the IBAN used. This eliminates the need of manual matching based on reference number or descriptions, which can be prone to errors and time-consuming
- Businesses can associate Virtual accounts to specific categories. When payment arrives through a designated Virtual Account, it is automatically categorized, saving time and effort.
- With automatic reconciliation, identification and categorization, the risk of human error is considerably reduced/minimized
- With real time transaction data, Business get an improved visibility and control over their finances
Liquidity management
Virtual accounts can enable corporate treasuries to centralize cash without the need for complex sweeping structures, thus helping 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 bank account
Payment Factories
By leveraging the potential of Virtual Accounts, businesses can establish efficient payment factories to optimize cash flow, enhance security and streamline financial operations.
On behalf of structures and in-house banking
VAM provides clients 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 ability to leverage gross accounting between entities rather than net accounting
6. What are different types of Virtual Accounts?
There are several types of virtual accounts each with its own unique features and benefits. Some of the most common ones in use are
- Fixed: These accounts have a single, permanent Virtual account number. They are often used for recurring payments or subscriptions
- Dynamic: These accounts generate a new Virtual account number for each transaction. They help prevent fraud and protect customer
- Single use: These are accounts designed for single transactions such as paying a vendor
- Multi use: These accounts are used for multiple transactions. Often used to manage project budgets and paying employees
- Escrow Virtual Accounts: These accounts are used to hold funds in trust until certain conditions are met.
- International Virtual Accounts : These are IBAN enabled Virtual Accounts which allows business to collect and make payments to customer in different currencies
7. What are different types identifier utilized in a Virtual Accounts (VAs)
VAs utilize various identifier types each offering distinct advantages and suitability for specific use cases.
- -Numeric Identifier: These identifiers can be sequential, randomly generated or Bank specific schemes
- -Alphanumeric Identifier: These identifiers can be randomly generated alphanumeric strings, custom formats for identification project specific accounts and International IBANSs supporting standardized format for international payments.
8. Which Business can benefit from Virtual Accounts?
Businesses of all sizes, government agencies, nonprofits, and even individuals (depending on the provider and purpose) can utilize VAs.
9. Can Business create Virtual Accounts on their own?
Yes, with self service capabilities, Business and Bank on behalf of the Business can create and manage virtual accounts.
10. Are there any charges associated with VAs?
Fees might vary depending on the provider and VA usage. Some offer free plans, while others charge per-transaction or monthly fees.
11. What is a lifespan of a VAs
Lifespans range from minutes (for one-time payments) to several months (for ongoing projects). It’s often configurable at creation.
12. What are the Payment modes supported on a Virtual Account?
Supported modes vary by provider, but common options include bank transfers, ACH payments, credit/debit cards, and e-wallets
13. Do Virtual Accounts support Collections and Collection on Behalf of?
Yes, VAs can be used to collect payments. The provider typically furnishes a unique VA number for each customer or transaction.
14. Do Virtual Accounts support Payments and Payments on Behalf of?
It enables Corporate/Corporate users to make Vendor Payments, Salary Payments, Bill Payments etc using a Virtual Account
15. Where is Money Stored?
Funds received through VAs are not stored in the VA itself but are deposited into the linked master account