So which companies have the most to gain from adopting virtual accounts? “We see broad application of virtual accounts across different industries – and the structure and activity of the company is more a determinant of suitability. In the end it is about having a quality conversation with your transaction bankers to shape the best solution for your business,” says Pyecroft.

For example, virtual accounts are particularly helpful where companies have complicated structures, or need to segregate funds across different customer or supplier accounts; for companies with franchise accounts; and for investment platforms that need to apply a rate of interest to individual customers’ accounts, to name a few.

Whilst many of the benefits of virtual accounts are enduring, as the UK interest rate remains high (even after the announcement of 1st August) it is important to concentrate cash effectively, striking the right balance between security, liquidity and yield. Pyecroft notes that treasury teams are increasingly being asked to deliver more with fewer resources, and some businesses have been affected more than others by post-Covid shock. “Working capital is still very much a priority for clients – and the simplest working capital management tool is knowing where your cash is and mobilising it efficiently.”

Evolution of virtual accounts

Virtual accounts have continued to evolve in recent years. Initial iterations focused on intra-company accounts, where external addressability wasn’t such a key priority. But as companies started to realise the broader potential for virtual accounts operationally, the need for external addressability became clearer: “Companies saw it would be great if their customers could just treat a virtual account as if it was a ‘real’ bank account when they were paying into it.”

In light of this evolution, Lloyds Bank has developed its EAVAs solution, which Pyecroft describes as a “significant upgrade on previous iterations of virtual accounts.” The solution is available to clients using Lloyds Bank Gem^®, and subscription fees apply. EAVAs have their own account number, so a virtual account structure is seamless in experience for their customers.

Companies can therefore achieve better payment processing and straight-through automated reconciliation with minimal workarounds, while benefiting from an easily maintainable structure which enables them to open and close accounts as needed.

The importance of spring cleaning

Getting ready for virtual accounts should involve cleaning up the company’s account structure so it can better support the operating and financing of entities across the group. This avoids bringing a dormant account structure into the virtual counterpart.

‘Spring cleaning’ can be very helpful before adopting a virtual accounts structure. As Pyecroft observes, “If you have a sprawling account structure from acquiring lots of businesses, a technology solution like virtual accounts doesn’t solve the problem. Without streamlining the account structure, we can miss the opportunity for added efficiency.”

Collaboration matters

To support the spring-cleaning effort, banks are becoming more proactive at helping their clients clean up their structures. “We feel it is important to be sitting beside our clients and doing the practical work together. You learn a lot from how clients intend to use the accounts, and you can help shape and advise along the way to get the right outcomes,” says Pyecroft. This not only streamlines the company’s account structure and reduces risk, but can also reduce the operating overhead of managing those accounts.

“One company I’ve worked with had 20,000 bank accounts globally,” he recalls. “If each of those accounts costs you, say, £1,000 in overhead per year to manage, you can unlock some pretty serious operational savings without any tech resource or build – simply by thinking it through clearly.”

Where to begin

For companies considering virtual accounts, Pyecroft says it is important to ask the right questions before choosing a particular provider.

“I have seen situations where treasurers have signed up for solutions missing the features they really needed – such as external references, interest allocation, cross-currency payment and self-serve functionality,” he recalls. “It was because they didn’t know to ask, but also the provider certainly hadn’t gone out of their way to highlight those gaps. To find out later that key pieces are missing on technology can be frustrating and costly – so it pays to measure twice and cut once.”

“Finally, your cash management and payments specialists are here to answer all of your questions and help you identify what you really need to support your treasury,” Pyecroft concludes. “We design these structures for our clients every day, and we’re here and ready to help.”