Research shows that nearly half of multinational corporates deal with hundreds of bank accounts, while over 10% attempt to manage more than 1,000 bank accounts. This complex banking landscape makes it increasingly challenging for finance professionals to perform essential tasks such as reconciling transactions or ensuring accurate cash flow forecasting.
Understanding how you can improve your organization’s multibank cash management is crucial for success. With so many accounts and multiple banking partners, effectively managing cash positions and bank interactions becomes increasingly challenging.
In this blog post, we will delve into the benefits of optimized multibank cash management, such as risk mitigation and improved visibility. We’ll then look at the challenges that come with managing multiple banking relationships and ways you can overcome them.
The Importance of Multibank Cash Management
As we saw from the aftermath of the collapse of Silicon Valley Bank, companies best keep their cash in multiple banks and accounts to mitigate risk and ensure deposits are FDIC insured.
Managing multibank cash positions has become increasingly complex due to intricate corporate structures, numerous relationships, and the possibility of human error. It is crucial for companies with significant business across various banks to integrate efficiently while reducing risks.
Mitigating Risk Through Diversified Banking Relationships
One way that you can optimize multibank cash management is by diversifying your organization’s banking relationships. This strategy helps reduce the impact of potential issues at a single bank on overall company finances.
By working with multiple banks, your organization can distribute funds across different institutions, thereby minimizing exposure to any one financial institution’s risks or failures.
- Cash managers: Corporate treasurers who perform cash management tasks should consider establishing relationships with several transaction banks rather than relying solely on a single bank.
- Liquidity management: Companies typically hold numerous accounts across various banking partners as part of an efficient payments operation strategy. This approach allows them better control over liquidity levels and enables them to optimally manage payments within each account.
Ensuring Deposits are FDIC Insured
In addition to mitigating risk through diversified banking partnerships, it’s essential to protect your companies’ deposits under the Federal Deposit Insurance Corporation (FDIC).
The FDIC insures depositors against loss up to $250,000 per depositor per insured depository institution for each account ownership category if a member institution fails or goes bankrupt. By maintaining balances below this threshold in separate accounts at different FDIC-insured institutions, you can safeguard your funds from potential losses.
The necessity of utilizing a multibank cash management system cannot be underestimated, as it is an effective method to decrease potential risk and make certain deposits are FDIC insured. Still, there are difficulties to be surmounted for a fruitful implementation when consolidating various banks.
Challenges in Integrating Multiple Banks
As companies expand their operations and work with multiple banks, they often face numerous challenges when it comes to integrating these banking relationships into a seamless cash management system.
Some of the most common issues include dealing with various workarounds, dedicated applications, and interfaces that introduce inefficiency and risk into the process.
Workarounds Lead to Inefficiencies
In an attempt to manage multiple banking relationships efficiently, corporate treasurers may resort to using different workarounds, such as spreadsheets or manual processes.
While these methods might provide temporary solutions for managing bank interactions, they can lead to inconsistencies in data entry and increased chances of human error.
Additionally, relying on manual processes can be time-consuming and hinder finance professionals from focusing on more strategic tasks like cash flow forecasting or liquidity management.
Complex Authorization Schemes
Different banks have varying authorization schemes for approving transactions which makes it challenging for companies working with multiple financial institutions. This complexity increases the difficulty of managing bulk payments across several banks while maintaining compliance with each institution’s specific requirements.
Furthermore, navigating through individual bank portals can be cumbersome and inefficient for corporate clients who need a streamlined approach towards multibank cash management.
The Need for Efficient Bank Connectivity
To overcome these challenges, companies require a single platform that can provide efficient bank connectivity and enable them to manage their cash positions across multiple banks. This would help in optimally managing payments, reducing operational risks, and ensuring compliance with various banking partners.
Enter: Open banking technology.
Open banking solutions like Trovata offer an innovative approach towards multibank cash management.
By leveraging APIs to directly connect corporate customers with their transaction banks, manual workarounds become obsolete and real-time access to account information from multiple financial institutions is enabled.
Treasury’s Preferred Solution for Multibank Cash Management
Okay, I might be a bit biased here, but Trovata is quickly becoming treasurers’ top pick for managing cash in multiple banks. That’s because, it was specifically designed for fast-growing treasuries who are looking to scale and automate cash management.
Companies of all sizes and industries like Sonos, Square, Draft Kings, Krispy Kreme, and CrowdStrike trust Trovata to manage over $100 billion daily.
Let’s look at some benefits of using Trovata for multibank cash management:
Improved Visibility Into Overall Cash Positions
One of the key benefits of using Trovata is its ability to provide real-time visibility into overall cash positions across multiple banks. As mentioned before, by leveraging open banking APIs and cloud-native technology, Trovata allows corporate treasurers to access accurate information on all bank accounts in one centralized location.
This streamlined approach not only saves time but also helps reduce human error that can occur when managing numerous accounts manually.
Secure, Resilient Interface with Multiple Banking Partners
In addition to improved visibility, Trovata offers a secure and resilient interface that simplifies managing interactions with multiple banking partners.
We are SOC-1 and SOC-2 certified, which means that we maintain a high level of information security. We continuously monitor the security of our infrastructure, network, data, product, app, and organization.
With efficient bank connectivity features, you can easily manage transactions from various banks without having to navigate through different portals or systems.
To illustrate how useful this is, when the Silicon Valley Bank (SVB) portal was down in the hours before it collapse, Trovata users were able to still see their SVB bank data in Trovata to make informed decisions and take action.
Leverage AI for Enhanced Decision-Making Capabilities
When dealing with data across multiple bank accounts, drawing meaningful insights can be tricky and time consuming. With Trovata’s AI-enabled platform, you can:
- Gather data-driven insights: Make more informed decisions based on historical trends and predictive analytics derived from transactional data across all connected banks.
- Automate cash flow forecasting: AI-driven cash flow forecasting tools within Trovata help corporate treasurers make better-informed decisions on managing their liquidity, ensuring that they can meet financial obligations and take advantage of growth opportunities.
- Mitigate risk: By identifying potential risks and providing actionable insights, the platform helps you proactively manage risk factors associated with multiple banking relationships.
In today’s complex financial landscape, having a comprehensive solution like Trovata is essential for companies looking to efficiently manage their multibank cash flow management operations.
With its cutting-edge features, frequent releases, and a user-friendly interface, Trovata empowers finance professionals to stay ahead of the curve while mitigating risks associated with managing multiple bank accounts.
Frequently Asked Questions
How Many Bank Accounts Should My Company Have?
While there is no silver bullet, businesses with over $5 million in annual revenues should have at least one deposit account, one disbursements account, one tax savings account, and one reserve account. Each additional location or entity your company has should also match this structure. Additionally, if your company has a high headcount, you might opt to have a payroll account. When in doubt, you could open enough accounts as needed so that you never have more than $250,000 (the FDIC insurance limit) in any one account.
What Are the Benefits of Using a Multibank Cash Management Platform?
Using a multibank cash management platform offers several benefits, including improved visibility into overall cash positions, streamlined workflows for efficient forecasting, secure and resilient interfaces with multiple banking partners, and access to cloud-based open banking APIs and mobile apps for better financial management. These platforms also help mitigate risks associated with concentrated banking relationships.
How Can Companies Ensure Secure and Efficient Data Sharing Across Multiple Banks?
To ensure secure and efficient data sharing across multiple banks, companies should leverage bank APIs, advanced encryption technologies, robust authentication mechanisms, standardized communication protocols such as ISO 20022 messaging standards or SWIFT connectivity solutions. Additionally, partnering with reputable fintech providers like Trovata ensures compliance with regulatory requirements while maintaining high levels of security.
What Technology is Needed to Effectively Manage Cash Flow Between Multiple Banks?
The necessary technology includes cloud-based platforms that support real-time integration through open banking APIs or direct connections to bank systems. Such platforms provide automated reconciliation tools for managing transactions efficiently while offering customizable dashboards displaying consolidated information from various accounts in different currencies.
How to Reduce Costs Associated with Multibank Cash Management?
First of all, instead of using a legacy Treasury Management System, look for a cloud-native treasury management software that can connect to your banks for a fraction of the price. Additionally, seek to automate manual processes, consolidate account and transaction data through a centralized platform, negotiate better terms and fees with banks based on aggregated volumes, leverage technology-driven insights to optimize working capital usage, and implement efficient API-based payment solutions that don’t charge additional fees.
The Bottom Line
As we’ve seen, managing a few or up to hundreds of bank accounts doesn’t have to mean more complexity and headaches for your treasury – we have tools for that!
Multibank cash management offers several benefits such as risk mitigation, FDIC insurance, increased efficiency, and improved visibility.
Trovata provides a solution with open banking APIs and AI technology that offers real-time insights and reporting to make multibank cash management simple. Choosing Trovata means having a clear line of sight into your organization’s multibank cash data while being secure compliant with scalable solutions.
See it in action! Book a demo or get started with Trovata today.