This issue’s question

“What constitutes best practice in bank account management?”

Bank account management (BAM) is a key preoccupation for corporates. Opening and closing accounts, and maintaining updated mandates throughout the whole lifecycle is both time consuming and costly, as well as a primary source of risk of error or fraud. It has to be handled in a structured manner to support compliance and audit requirements – particularly in Asia Pacific where local bank relationships are still required which results in a large number of bank accounts, thus increasing BAM-related challenges.

The set-up of treasury centres (TCs) has allowed corporates to have global visibility on their liquidity through the consolidation of all accounts in their web banking or treasury management systems (TMSs).

The next step involves getting control of the end-to-end payments and collections process through a payments and collections factory. This can be achieved through a central ERP, which drives the harmonisation and standardisation of internal processes, associated with a central connectivity solution with all their banks. This set-up allows the TC to monitor the usage of local accounts while the corporate subsidiaries can keep their financial independency. Some corporates create shared service centres (SSCs) to streamline these processes further, starting from the invoice approval stage.

The ultimate control level is the in-house bank (IHB) which holds all accounts and acts on behalf of the other group legal entities. This type of structure requires full intra-company accounting and implies the financial disintermediation of the subsidiaries.

In Asia Pacific, some corporates have established a TC and some have initiated a centralisation process but very few use IHB as most of the countries do not allow ‘on behalf of’ instructions. This leaves open the challenge of BAM.

BAM begins with account opening, which is often considered a cumbersome process by corporates. In order to simplify and facilitate this process, BNP Paribas has harmonised its legal documentation across Asia and designed a web interface, ‘My Accounts’, accessible through its global centric portal, which facilitates the completion of requested forms, sign-ups to transaction banking products as well as guides on the documents to be provided for KYC requirements. This user-friendly solution can be used both by the treasury centre and its affiliates.

BNP Paribas is also addressing the corporate treasurer’s concern on mandate management through electronic bank account management (eBam) solutions adapted to the connectivity solution chosen by the corporate. These solutions are currently being piloted in Europe and include:

• Connexis eBam: a module of BNP Paribas international web banking, which allows corporates to request paper mandates changes across countries and download detailed reports for internal audit purposes.
• eBam File Transfers: leveraging XML messages newly designed by the Common Global Implementation (CGI) for corporates using SWIFTNet to communicate with all their banks.

eBam can only be achieved with collaboration among the treasury community (corporate, banks, vendors, consultants) for the benefit of all stakeholders. BNP Paribas is very supportive of eBam, bringing its strong expertise in XML formats as well as its long-standing culture of standardisation to the initiative.

In Asia it is not uncommon for companies to have several hundred if not thousands of bank accounts and many different bank relationships. This somewhat unique circumstance presents geographically unique challenges brought about by the number of countries that are in varied states of economic development, each with its own regulations governing the flow of cash across borders, making it difficult to be serviced by just one bank.

Furthermore, given the volume of M&A activity in the region bringing more bank accounts, more bank relationships and new connectivity issues into the mix, the complexities financial professionals face are compounding. For these reasons, it seems like a good time for growing companies to take stock of best practices in bank account management and the value that a common treasury management system in the cloud provides companies that want to operate easily and securely across all of their banks and all of their bank accounts.

M&A activity is a driver of better bank account management. By the end of 2015, the total value of M&A deals in Asia was up 49% year-over-year, with Japan up 48% during that same time period, according to Dealogic. While this activity demonstrates tremendous growth, it also paints a picture of post-merger treasury operations, where teams grapple with integration issues, increasing bank relationships and accounts, broken processes, and increased opacity of cash positions and exposures. It becomes more time consuming and risky to move from bank portal to bank portal, using several different dongles to piece together a cash position, which then is dangerously out of date. More bank connections and lack of controls increase the risk of financial fraud, most of which happens internal to the organisation. This issue is currently front and centre in the minds of financial professionals.

All of these challenges impact bank account management, but they can be addressed by implementing best practices and standardising treasury on a common cloud-based technology platform, accessible from any location where treasury and its subsidiaries operate. Fast-growing companies can implement the following best practices:

Centralise bank account management.

Deploy a systematic approach to managing company-wide bank accounts and centralise bank account administration, including bank account activities, such as openings, closings, and signatories.

Create an authorisation matrix.

Define signatory and approval workflows to control bank account activity. Implement an appropriate segregation of duties, a clear policy for the use of local and foreign currency bank accounts and audit trails to prevent internal and external fraud.

Review bank connections.

As banking relationships are managed centrally or through regional treasury centres, the finance team can do a thorough review of the entire bank portfolio and decide how to best connect to bank partners.

View cash and risk positions in real time.

Consolidating cash positions and obtaining a clear picture of the cash on hand can be time-consuming and error-prone. However, treasury technology can provide intra-day visibility into cash positions and related exposures, while optimising working capital at the same time.

Analyse cash flows.

Analyse the consolidated cash data in order to make short-term investment and financing decisions. Do this by entity, currency, country, cash-flow category and business unit.

Implementing best practices in bank account management will bring increased visibility and control to cash, liquidity and operational risk management as companies adopt a systematic approach. Furthermore, it will reduce bank fees from transactional and operational costs as companies rationalise bank accounts and relationships.

As companies continue to scale their treasury operations to support future growth and M&A activity, using a cloud-based treasury management system will bring more value to the bank account management process. Companies will gain efficiencies by automating bank statement collection instead of manually logging into multiple bank portals to oversee bank accounts in different geographies. This not only improves security and compliance, but because software delivered as a service is always current and continuously monitored, it mitigates the threat of cyber fraud.

Best practices in bank account management deliver visibility into and control of global bank accounts.

The challenge for most treasury teams is when organisations expand internationally and control of the opening of accounts becomes decentralised to non-treasury users in local markets. Without a single system of record for all accounts and signatories on those accounts, there is no centralised control over how accounts are opened, closed, and maintained. This introduces risk for the entire organisation, as funds within those accounts can potentially be at risk as well as the possibility of new accounts being opened, unknown to treasury and finance. While the most serious scenarios involve fraud, the issues for the organisation may be as simple as treasury not having visibility into idle cash balances because they didn’t know the bank account existed.

To solve these issues, organisations will use a central technology platform – often in the cloud and in many cases part of their treasury management system – to ensure that details of all accounts are centrally managed in addition to a separation of duties for opening, closing, and making changes to authorities on bank accounts. It is this separation of roles – into front and back office functions – that offers the requisite control so that treasury can confidently say they have complete control over bank accounts and the funds within them.