Reality Check: The Dream of a Single Bank-Account Structure

A recent Reval survey which polled more than 160 financial professionals in leading international companies showed that, on average, the treasurer is dealing with up to 100 bank accounts at anywhere between two to five banks.

In addition, 16% of treasurers responding say they juggle more than 500 bank accounts, and 20% report that they are working with more than 20 banks.

It is obvious that multiple bank accounts and bank partners make it more difficult to oversee all cash positions. Adding more complexity are the different currencies and regulatory regimes. Cash management and forecasting become more challenging because financial data from decentralized entities across different time zones have to be captured.

This situation is apparent in Asian markets, where the treasurer has to manage global and domestic banking accounts across various countries. It is, however, the reality of operating a global treasury.

When Treasury Becomes Global

Rapid growth in regions such as APAC is challenging treasury departments to keep pace with fast-changing organizational structures. With that comes the increasing need to manage the complexities of global operations.

Seek Limited, a leader in the online employment and training market in Australia and New Zealand, for example, changed its treasury landscape significantly when the company expanded its international business to Southeast Asia, China, Brazil and Mexico in 2011 and 2012.

“It became more challenging to consolidate financial data on an enterprise level,” recounts Group Finance Director Eddie Collis. It was difficult to “gain visibility into actual and forecasted cash flows in different currencies, understand foreign exchange and interest rate exposures, and centrally manage more complex funding arrangements for the whole group.”

It was unrealistic to streamline to a single bank account structure. But Seek, like many global treasuries, needed to find ways to reduce the complexity of cash and risk management.

What they can do instead is adopt the right combination of organizational structures and supporting technology. With this, they can centralize their treasury operations, standardize workflow, establish in-house banking structures, and streamline systems.

Centralize Treasury

This is why many companies are moving toward a more centralized treasury organization. The aim is to concentrate the flow of all cash centrally for easier control over related risks, such as FX, interest rate, counterparty and liquidity risk, and to facilitate inter-company funding.

Malaysian telecommunications company Axiata Group established an award-winning regional treasury center (RTC) to enable better cash and financial risk management. 

“If you look at it operationally, the opcos [operating companies] had hundreds of bank accounts sitting around,” says Azlin Manan, group treasurer of the Axiata Group.

“We chose to rationalize the number and make it more manageable. We cut the [number of] accounts down by 50%, which gave ourselves a better view of cash flows and saved on transaction banking costs, too.”  

Centralization can deliver:

  • Bank account rationalization and better fee management
  • Improved working capital management, reducing fees and charges
  • Improved cash visibility and standardization
  • More effective FX, interest rate and commodity risk management
  • Cost savings through netting

Standardize Workflow  

In addition to centralizing bank accounts and bank portfolio management, treasurers commonly review their processes to make them consistent and more efficient.

But in general, workflows set up for a small team based in the same location do not work for global teams collaborating across borders and time zones. In addition, processes are often set up differently from one company to the other.

However, establishing common workflows and policies is imperative for risk mitigation, especially for organizations growing through mergers or acquisitions. Standardizing workflows that apply to teams small and global and the company’s various subsidiaries in different sectors and geographies should therefore be a priority.

Establish an In-House Bank

The in-house bank concept centralizes all payments and collections via an in-house bank process. Physical cash movements go through single accounts, not one per legal entity or business unit.

This process can have a dramatic impact on the number of bank accounts required by an organization. Subsidiaries effectively have an ‘internal’ bank account that, from their perspective, can work the same as a real bank account.

But the fees and interest incentives are typically built by the company’s treasury department, not by a selection of external liquidity providers. 

Consolidate Systems

Business growth and globalization often herald the end of the era of spreadsheets, as these simple tools are no longer secure or efficient. Fully 80% of treasurers surveyed recently by Reval believe that technology can support change in treasury.

This makes sense as treasurers typically review their systems landscape in parallel to their processes. Leveraging modern cloud-based treasury technology can make the treasurer´s life much easier.

One example are single-version, software-as-a-service (SaaS) platforms that deliver comprehensive and integrated treasury and risk management (TRM) capabilities. With these types of advanced SaaS TRM solutions, all treasury cash flows and exposures can be securely captured in a single system and are available for further processing and analysis in real time, right within the platform.

Additionally, workflows can be streamlined with third-party systems, seamlessly integrating banks, market data and credit rating services, trading and confirmation platforms, as well as enterprise resource planning (ERP) and general ledger software.

In this respect, treasurers can not only reduce the complexity that globalization has placed upon them, but also increase the visibility they need to build their global cash positions in Asia Pacific markets that are now material to the business.

About the Author

Tony Singleton is Asia Pacific Managing Director at Reval, a global provider of comprehensive and integrated Software-as-a-Service solutions for Treasury and Risk Management.

Photo credit: Shutterstock


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