Photo of Mario Ng, DBS and Ken Wong, Chinachem Group.

This solution addresses rental and management fee receipts via cheque payments across over 200 properties. This is an innovative use of a virtual account (VA) structure which is becoming more and more popular today. This particular solution uses the payee identification rather than payer, facilitating a much improved collection and reconciliation process.

The challenge

On a monthly basis, Chinachem receives rental and management fee payments via cheques across over 200 property companies. A great deal of manual effort would go into reconciliation if all cheques were required to be deposited into the respective bank accounts of each property company, across different banks. As a result, there was little opportunity for centralisation. As Ken Wong, Treasury Manager says, “We can neither deploy human resource in an optimal way nor enjoy yield enhancement on the entire operating balance, if funds and accounts were managed in such a decentralised manner.”

The solution

After several rounds of discussions with their bank, they worked out an innovative and tailor-made receivables solution based on the concept of virtual account (VA) for each property company, linking them to only one physical account maintained with DBS to overcome the challenges.

Chinachem assigns a VA name and VA account number to each of their property companies so that the tenants can pay their rent and/or management fee accordingly.

Key features of the solution are:

• Instead of setting up numerous bank accounts, only one physical account is opened and all VA accounts are linked to it.
• The payments received in each VA are directly credited to the physical account on a real-time basis so that the group can enjoy high interest, while being able to clearly identify the payee and payment channel via a daily internet banking report.
• The maintenance of VA is also much easier than a normal bank account, where they can add, modify, delete or suspend in a timely manner.
• The ‘Payee Name Differs’, with each cheque the payee has to be exactly matched with the cheque payee bank account name, has been resolved. As the VA solution allows the incoming balance to be immediately credited to earn interest while the ‘Payee Name Differs’ issue is being handled.
• Higher yield on operating balance, benefiting from the real-time cash concentration.
• DBS has arranged a “Collect All” service where cheques are picked up from the company’s office for further processing to enhance their experience in bulk cheque deposit handling.
• DBS also provides the same VA services over the counter, enabling its staff and its customers to make use of the DBS branch network for payments received on an ad-hoc basis before the cheques are picked up by the “Collect All” service.

Best practice and innovation+

Wong recalls, “When it comes to centralised cash management solutions, banks will typically propose a physical sweeping structure. However, our pain point is in reconciliation, and it precedes the need for yield enhancement. We have learnt that in the market, there are similar VA solutions using payer identification instead of payee identification, which is not what we were looking for.”

It is an honour for Chinachem Group to receive the award with the help of DBS. DBS has been working with Chinachem Group to provide a full range of financial services including bank account management, liquidity management, yield enhancement solution and financing solution. Winning an Adam Smith Award Asia is a milestone success for both DBS and Chinachem Group in our long-term relationship.

Ken Wong, Treasury Manager, Chinachem Group

The solution was implemented in a very short timeframe and offers exactly what Chinachem needed in terms of a VA solution to identify the payee.

Wong concludes, “We have now adopted it for all of our subsidiaries that we think are in need of enhancing our cash management efficiency.”

Key benefits

• Efficiency

  Faster and simplified collection and reconciliation process, so that the Group can free up and allocate resources more efficiently.

• Innovation and technology

  First VA solution assigned to payee instead of payer and addressed the ‘Payee Name Differ’ issue.

• Bank account management

  Streamlined bank account structure with easy maintenance via the VA structure.

• Yield enhancement

  Higher yield on operating balance with real-time crediting arrangement.

Key learning points

Thinking out of the box is one of the important factors to work towards a solution in treasury management. Instead of stopping at a typical physical sweeping structure, DBS and Chinachem Group worked out an innovative solution by assigning the Virtual Account (VA) to payee instead of payer to address the “payee name differs” issue. This tailor-made solution centralises the funds of over 200 property companies to one physical account through VAs, which is exactly what Chinachem needed.