Questions & answers

If you have a question, this is where you can find answers to your most common questions related to our Virtual Cash Management offering.

 

Questions & answers

 

1. In a nutshell, what is Virtual Cash Management and how does it work?

Virtual Cash Management (VCM) is a next-generation digital cash management solution centred around treasurers’ current and future needs. Designed to help treasury functions reach the next level of optimisation, VCM facilitates centralised cash management, visibility and control – without the significant cost or complexity that is traditionally associated with such goals.

The Virtual Cash Management solution combines a cross-border Virtual Bank Account (VBA) structure with Virtual Ledger Accounts (VLA) displayed in an advanced multi-bank cash management dashboard, offering a group-wide view of all payments, collections and cash - as well as enhanced reporting functionalities.

The VBAs, with properties comparable to traditional IBANs, will replace all current accounts and are linked to one master current account. The VLAs are administrative sub-accounts allowing to allocate cash without physically having to divide it, enabling the treasury department to act as an in-house bank with advanced features including improved reconciliation, invoice matching and Intercompany loan administration (ICLA).

No other bank currently offers such a comprehensive solution.

 

2. What are the benefits of Virtual Cash Management for treasurers?

Of course it depends on each company’s specific needs and challenges, but Virtual Cash Management offers benefits on a number of levels.

 

From a cash visibility and availability standpoint, it:

• Offers full, group-wide visibility and control over payments, collections and cash

• Facilitates central availability of cash

• Supports working capital optimisation.

 

From an operational efficiency point of view, it:

• Helps rationalise bank account structures

• Increases STP and STR – providing a sophisticated invoice matching engine and enriched reporting

• Creates an in-house bank without the need for expensive systems and/or resources

• Lowers barriers to entry around POBO/COBO.

 

From a technology perspective, it:

• Offers customisable, enriched reporting

• Provides near real-time information

• Works regardless of IT set-up, integrating seamlessly with the treasury department’s existing IT infrastructure

• Provides a self-service, multi-bank cash management dashboard.

 

Away from its more practical aspects, the solution helps treasurers to:

• Operate on a more strategic level

• Make faster, better-informed decisions

• Embrace best practices

• Free up time for more value-added tasks

• Future-proof treasury.

 

In short, Virtual Cash Management is a comprehensive yet scalable solution that responds to treasurers’ operational and strategic needs.

 

3. Why did ING decide to offer this solution?

There are a few different reasons for this:

• Digitalisation. The digital age presents exciting opportunities to support clients with better, faster and cheaper services and solutions – and to empower them to stay a step ahead. This is especially true in the treasury arena, where digitalisation can open up a new world of insights and enable more accurate and faster decision-making for treasurers. We saw an opportunity to leverage digitalisation in such a way that corporates of all sizes could manage group-wide cash in a digital arena through a single, flexible, multi-bank, self-service portal that can seamlessly integrate into any treasury department’s existing IT infrastructure. Virtual Cash Management is our way of making this vision a reality.

 

• The need for treasurers to do more with less. Treasury departments are increasingly being organised as value-added cost centres, meaning that they have responsibility for cost management while also being expected to provide added value to the business. However, most treasury departments have limited extra resources, technology or budget to help them fulfil this new role so they are looking for ways to centralise, optimise and automate in a world where risk mitigation and liquidity are key priorities. At ING we recognise that centralisation isn’t always easy and that budgets are tight. So we wanted to create a solution that would help treasurers take the next step in the centralisation of their organisation while facilitating sound strategic decision-making and increasing overall efficiency, regardless of the financial IT landscape.

 

• Regulation. The anticipated impact of Basel III on notional pooling was another driving force behind building the VCM solution. In brief, Basel III means that banks will likely have to keep more liquidity on their balance sheet to cover notional pools. The expectation is that this will increase the cost of such arrangements, making them uneconomical for many treasurers. ING recognised that cash concentration through the use of Virtual Bank Accounts could be a good alternative. In addition, the procedures treasury departments face in their daily cash management tasks have come under the SOX microscope and automating activities is key to optimising control.

 

4. What are the key components of VCM?

Creating a complete Virtual Cash Management solution by combining the VBA and VLA components is what makes it particularly powerful. By pairing the benefits of cross-border Virtual Bank Accounts with a multi-bank cash management dashboard, centralised cash visibility and availability can be achieved across the group, no matter how the company’s treasury function is organised, or how sophisticated and harmonised its technology infrastructure is. The complete VCM solution also enables treasurers to establish an in-house bank and on-behalf-of structures, while facilitating invoice matching and offering enriched, near real-time reporting to increase reconciliation rates. As VCM supports timely, informed decision-making it assists treasurers in delivering strategic value, drive business performance, and increase overall efficiency.

 

5. What’s different about ING’s Virtual Bank Account solution within VCM?

There are other virtual account solutions in the market, but the term means different things to different providers. What’s interesting about ING’s Virtual Bank Account solution is that it operates on a cross-border basis. So the Virtual Bank Account and the current account do not have to be in the same country as long as they are in the same currency. From the third quarter of 2016 the cross-border VBAs will be available for receivables. We aim to roll out the same for payables in the course of 2017. The Virtual Bank Account solution helps rationalise bank account structures and centralise multi-entity cash and incoming transactions. It can also improve reconciliation through improved payer identification, thereby reducing manual post-processing. However, this is just part of the overall Virtual Cash Management solution.

 

6. What exactly are Virtual Ledger Accounts within VCM?

To summarise, VLAs are administrative sub-accounts that enable cash allocation for certain purposes without physically having to divide it. The VLAs can easily be set up using a flexible, self-service digital dashboard that gives treasurers access to all available banking data not only across ING bank accounts but on a multi-bank basis. That way they have a complete overview of all payments, collections and cash across the group - in near real-time and in multiple currencies. This includes intercompany loans and intercompany and intracompany payments. The Virtual Ledger Accounts displayed in an advanced multi-bank cash management dashboard enable treasurers to set up an in-house bank, lower the barriers to entry for payments and collections on-behalf-of structures (POBO/COBO), and help optimise reconciliation, thereby reducing days sales outstanding (DSO). Again, Virtual Ledger Accounts are just one part of the overall Virtual Cash Management solution.

 

7. How does multi-bank visibility work? Is it truly multi-bank?

Yes, it is truly multi-bank. We receive SWIFT statement messages (e.g. MT or XML) from third-party banks and then integrate them into our channels to provide multi-bank visibility. It is also possible to initiate payments via Swift MT messages to other banks.