Treasury and finance departments are being asked to do more with less – and to do it faster and more efficiently than before. There’s tremendous pressure to manage cash positions to ensure the organization has the working capital to meet daily operational needs, as well as the flexibility to respond quickly to new opportunities. Achieving that requires a clear view on liquidity.
The accounts receivable function is one area where there’s definite value to be unlocked.
“Think of clients in the retail segment with dozens of stores,” says Jude Leclerc, Country Head of Product, Global Liquidity & Cash Management at HSBC Bank Canada (HSBC). “It’s time consuming and often complex for the central office to match up sales receipts from each store and differentiate individual customers. It’s similarly complex for companies receiving payments from multiple customers. Given the various collection channels available to the client, the information that accompanies the payment – particularly about the payer – is not always included, or only partially included. It means that businesses must spend significant time reconciling a remitter or payer’s identity to the payment.”
With large numbers of receipts, organizations are looking for practical, easy-to-implement solutions that allow them to more quickly access their receivables, bring greater transparency to payments and streamline reconciliation processes from various payment methods.
A recent study showed that four out of five receivable managers said that being able to more efficiently match payments with remittance information was important or very important to them, with 44% reporting a straight-through processing rate of less than 75%.1
The report also notes that improving that processing rate could pay dividends. Solutions that leverage the power of technology – including the virtual account receivables solution offered by HSBC – are helping treasurers better address their working capital needs and free up liquidity.
Virtual accounts are an increasingly popular way to bring efficiency and control to the accounts receivable process, says Ms. Leclerc. She explains that organizations can be provided with up to 100,000 virtual account numbers that can then be assigned to each individual payer. The payer then deposits funds to their dedicated virtual account number, against which the funds are automatically credited to the organization’s main account. The virtual account number (or the pre-defined reference information) is shown on the customer’s main account statement, allowing for immediate and automatic payer identification.
“It’s a proven solution being used by HSBC clients around the world who appreciate its flexibility, scalability and greater transparency and control,” says Ms. Leclerc.
One HSBC customer, a global retailer with a significant presence in Canada, faced a lack of visibility on in-store deposits and inefficiencies due to manual reconciliation. The customer assigned virtual accounts to close to 100 stores, enabling the treasury department to identify payment receipts on a store-by-store basis and automate collection across channels, including point of sale, cash and cheques (which averaged more than 2,500 deposits equivalent to $175 million in value each month).
This solution enabled automatic payer identification regardless of the remittance information included in the transaction, significantly improving transparency and control. Data can be integrated with the ERP so that account receivables are reconciled in real time and treasurers have a more accurate and consolidated view of funds on hand.
“Whether a mid-sized business aims to accelerate the reconciliation of incoming payments or a national retailer is looking for greater transparency of payments from subsidiaries or stores, HSBC’s Virtual Accounts Payer Identification is a solution that can address a common problem faced by many businesses,” says Ms. Leclerc.
That’s increasingly important for treasurers, who are taking on roles of greater strategic value in their organization, according to the 2017 AFP Strategic Role of Treasury Survey.2 Almost three-quarters of treasurers surveyed believed that this was a result of the “close attention paid by senior management and the Board to the companies’ liquidity and risk exposure.” Along the same lines, the survey found that “60% of organizations measure treasury’s success by its ability to reduce borrowing costs and/or achieve liquidity targets.”
Organizations can draw on a range of solutions – from receivables finance to global payments – to achieve these goals. HSBC Virtual Accounts Payer Identification solution is an additional tool for corporates seeking to accelerate reconciliation of incoming payments or gain greater transparency on payments from subsidiaries or stores. These and other products add value by automating routine processes, bringing more visibility and control to incoming payments and enabling organizations to gain a clear picture of their liquidity position.
If you’d like to learn more about the Virtual Account Payer Identification solution, please reach out to your HSBC representative.
1 Aite Group, Top 10 Trends in Wholesale Banking & Payments, 2018: The Customer Comes First, 2018
2 Association for Financial Professionals, Strategic Role of Treasury Survey: Report of Survey Results, 2017
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Issued by HSBC Bank Canada ("HSBC")