Cash & Liquidity Management

Page 1 of 2

The Benefits of Virtual Cash Management ING introduced its Virtual Cash Management (VCM) solution over 1 year ago. VCM is an award winning, visionary concept, outlined here in more detail by Dick Oskam, Global Head of Sales, Transaction Services for ING who also explains some of the benefits for customers.

The Benefits of Virtual Cash Management

The Benefits of Virtual Cash Management 
By Dick Oskam, Global Head of Sales, Transaction Services, ING


ING introduced its Virtual Cash Management (VCM) solution in 2016, a visionary concept that was awarded the TMI Award for Innovation and Excellence for Cash Management Solutions, 2016. In this article, Dick Oskam, Global Head of Sales, Transaction Services, for ING, outlines the VCM solution in more detail, and some of the benefits for customers.


An integrated approach to liquidity and information

Virtual account solutions, both virtual IBANs and virtual ledger accounts, have become increasingly popular, but each of these tends to solve a particular challenge, whether centralising liquidity or facilitating auto-reconciliation of incoming flows. Many corporations have a combination of objectives, however, so they need an integrated approach that delivers the benefits of both virtual IBANs and virtual ledger accounts. This is the background to ING’s virtual cash management (VCM) solution, which offers virtual IBANs in each location, facilitating both domestic and pan-European requirements, in combination with a Virtual Ledger Account (VLA) solution for reconciliation and the provision of enriched cash flow information (Box 1). This comprises an advanced multi-bank dashboard to define administrative sub-accounts that treasurers can use to allocate cash e.g., to business units, product lines, flow types etc. without the need to segregate it physically.

Demand for VCM

A growing number of clients are now using VCM, which was launched in 2016. While there are a variety of different drivers for adopting VCM, most clients are seeking to centralise liquidity in one location, whilst enabling business units to have viewing rights of one or more virtual IBANs in their country or to initiate payments from the central account for their country. Many of these clients have also introduced payments on behalf of (POBO) and/or collections on behalf of (COBO). VCM is particularly attractive in this situation. When using POBO, suppliers and tax authorities can easily identify payments as they are routed through the local Virtual IBAN, while under COBO models customers have the assurance of paying to a local (virtual) account in the name of the entity with which they do business. At the same time, the company can leverage the full benefit of these models as they are, in reality, making or receiving payments through a single payment/collection account.

The benefits of this simplified bank account structure are manifold: 

  • Clients avoid the complexity of domestic or cross-border cash pooling, and new entities can be incorporated quickly, whether from a liquidity, POBO and/or COBO perspective simply by converting accounts from physical to virtual and linking them to the central physical account.

  • Cash is concentrated at any point in time in the central account optimising liquidity management. Surpluses and deficits across entities are automatically netted, reducing borrowing costs and enabling cash to be invested in line with the company’s investment policy, avoiding fragmentation and non-compliance with group policy.

  • Operational controls can be better managed, including authorised signatories with fewer accounts that are operated by treasury.

  • At the same time, VCM enables clients to benefit from rich information on incoming and outgoing payments, allowing auto reconciliation and sophisticated data analytics.



Next Page   2 

Save PDFs of your favorite articles, authors and companies. Bookmark this article, or add to a list of your favorites within mytmi.

Discover the benefits of myTMI

 Download this article for free