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portal to bank portal, using several different dongles to piece together a cash position, which then is dangerously out of date.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.