Virtual Account Management

Sometimes abbreviated VAM, virtual account management is the process of organizing information about a subset of cash within a traditional banking service. Information about the virtual account is held on a virtual ledger which behaves the same as any traditional bank account.

VAM is one of the contemporary solutions for increasing business flexibility. By being able to configure and control the existence of accounts and automating how their transactions are categorized, treasury management professionals can focus on liquidity management instead of administering physical accounts or chasing transactions which lack reference numbers.

Implemented properly, virtual account management assists treasurers in their pursuit of centralized transaction processing and rationalized account structures. By concentrating liquidity in a single account, physical sweeping is no longer needed.

The end result is an improvement in flexibility, visibility, and speed, improving three key elements of strategic banking.


What is a virtual bank account?

A virtual bank account is a financial reporting tool consisting of a granularized sub-ledger of a traditional “physical” bank account.  It provides better organizational capabilities within a pre-existing bank account. The virtual bank account improves cash visibility by allowing a treasury management professional to keep transaction data organized according to flexible or transient criteria. It is grafted on top of existing account structures as a separate or unique view into working capital and cash flow.

Virtual bank accounts provide all of the cash management reporting and analysis functionality of a physical bank without requiring the opening of multiple bank accounts.


How do virtual accounts work?

Virtual accounts have a clearing-recognized number that operates in much the same way as a reference number. When transactions pass through virtual accounts they are posted to both the virtual and the physical host bank accounts. For the person interacting with it, there is no difference between virtual and physical accounts. For the treasurer keeping an eye on liquidity, payments, and real-time cash analysis VAM provides a useful reporting service without the associated burden of creating new real-world bank accounts.


Virtual Account Management: Advantages

  • Increased flexibility

  • Improved automation

  • Easier reconciliation

  • Efficient liquidity management

  • Decreased need for physical accounts

Flexibility: In today’s fast-paced business environment flexibility is crucial. Being able to configure and assign categories to accounts quickly and efficiently while retaining important reporting and visibility requirements keeps your organization nimble and responsive to the marketplace. Accounts can be configured for specific business lines, services, markets, corporate initiatives, or transient payment needs.

Automation: Transactions are automatically categorized properly. This means if it clears it’s categorized. This improves both the velocity of the transaction data available to treasury professionals.

Reconciliation: No more transactions with forgotten reference numbers. Before, if a reference number wasn’t included with the transaction then it might clear but it would come through without any indication of how the transaction should be categorized. This extra work is no longer needed.

Liquidity management: since cash is concentrated in a single account, the need for complicated sweeping structures is eliminated.

Less banking administration: Complex business reporting needs can be satisfied via VAM while requiring the administration of just a single physical bank account.

Not all treasury management systems have the flexibility to handle virtual accounts. If your corporate strategy would be improved with the advantages outlined above, you will need a platform that supports virtual account management.

Trovata handles virtual accounts seamlessly, aggregating and normalizing your bank data across all of your global accounts, to help you manage your cash flow, cash reporting and forecasting with precision. Request a demo and let one of our experts show you how this works.

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