In today’s competitive and dynamic business environment, medium-sized and large companies face a number of complex challenges in managing their finances, and more specifically their treasury. Operational efficiency and accounting accuracy have become essential factors for success in today’s business environment. In this context, virtual accounts emerge as an innovative and powerful solution that facilitates accounting and optimises the reconciliation of receivables.
Below, we will explain in depth what virtual accounts are and how they can transform the financial management of companies. We will also look at the benefits of using them to effectively segment and manage income, and highlight how their implementation can reduce errors, speed up accounting processes and improve the accuracy of financial records.
Virtual accounts are sub-accounts created under a main bank account, specifically designed to facilitate segmented financial management. Unlike traditional bank accounts, virtual accounts do not physically exist, but are linked to a main account, allowing for flexible and efficient management of income and payment flows.
Each virtual account can have a specific purpose, such as receiving payments from a particular customer, managing revenue from a particular project or separating cash flows from different departments or business units. This segmentation capability is key to improving the financial and operational management of companies.
Virtual accounts have a number of advantages, which we review below.
One of the principal advantages of virtual accounts is the ability to effectively segment revenues. By assigning specific payments to different virtual accounts, companies can keep detailed track of their revenue streams. This segmentation facilitates the identification of revenue streams and allows for a deeper analysis of the profitability of each business segment.
For example, a business that manages multiple projects can use virtual accounts to track income and associated expenditure with each project independently. This not only simplifies accounting and bank reconciliation, but also provides a clear view of the profitability and financial performance of each project, which is essential for strategic decision-making.
The reconciliation of receivables is one of the biggest challenges in corporate accounting. This process involves comparing internal records of financial transactions with bank statements to ensure that all payments and receipts have been recorded correctly. Virtual accounts simplify this process by allowing each payment to be recorded in a specific account, reducing the possibility of errors and discrepancies.
By having payments clearly defined and allocated to virtual accounts, companies can speed up bank reconciliation and ensure that financial records are up-to-date at all times and in real time. This not only saves time but also improves the reliability of financial data, which is crucial for planning and decision-making.
The automation and segmentation offered by virtual accounts significantly reduces manual errors. In a traditional accounting environment, the allocation and recording of payments can be prone to human error, which can lead to discrepancies and the need for costly and time-consuming corrections.
With virtual accounts, the payments are assigned automatically to the corresponding sub-accounts, so that it minimises the possibility of errors. This not only improves the precision of the financial records, but it also accelerates the accounting process. By reducing the administrative toll and errors, businesses can focus on more strategic and value-added activities.
Accurate financial records are crucial for effective financial management. Virtual accounts ensure that every transaction is correctly documented and allocated, which improves the accuracy of financial statements. This provides companies with a clearer and more accurate view of their financial situation, which is essential for planning, analysis and decision-making.
Improved accuracy of financial records also facilitates regulatory compliance and auditing. Companies using virtual accounts can provide clear and detailed documentation of their financial transactions, which simplifies the audit process and reduces the risk of sanctions and penalties for non-compliance.
A Madrid-based business consulting firm, Consultoría XYZ, with more than 200 employees, managed multiple projects and clients in various industries, including technology, finance and healthcare. Prior to the implementation of virtual accounts, the company faced significant challenges in reconciling receivables and managing its revenue. Payments from clients went into a centralised bank account, which complicated the identification and allocation of revenue to specific projects and their respective clients.
The implementation of virtual accounts allowed XYZ Consulting to assign a unique virtual account to each project and client. This facilitated the tracking and reconciliation of collections, as each transaction was automatically identified with the corresponding project. For example, payments from the Tech Innovators client for the digital transformation project were deposited directly into a dedicated virtual account, separate from payments from other clients and projects.
As a result, XYZ Consulting experienced a 50% reduction in time spent on receivables reconciliation, from an average of 40 hours per month to just 20 hours. This improvement allowed the finance team to focus on more strategic tasks. In addition, the accuracy of financial records improved significantly, reducing errors by 30%, resulting in more reliable and timely financial reporting.
In addition, the ability to analyse in detail the revenues and costs of each project also allowed XYZ Consulting to optimise its resources. For example, the company identified that the consultancy project for FinCorp had a 25% profit margin, while the project for Health Solutions had only a 15% margin. This information allowed management to make informed decisions on resource allocation and fee negotiation, which ultimately led to a 10% improvement in the company's overall profitability.
On the path towards financial modernisation, Embat acts as a key enabler for businesses to adopt and leverage innovative technologies such as virtual accounts.
Embat provides a wide range of services and solutions designed to help companies to modernise their financial management, drawing on the full potential of virtual accounts.
As a result, Embat's platform automates a range of accounting processes, from receivables reconciliation to financial reporting, reducing the administrative burden and improving the accuracy of financial records. In addition, Embat's platform easily integrates with best-of-breed ERPs such as Business Central, SAP Business One or Oracle NetSuite, facilitating the adoption of new technologies without disrupting day-to-day operations.
The businesses that work with Embat can expect a number of tangible benefits:
Conclusion
In summary, virtual accounts represent a powerful and transformative tool for medium and large businesses. They offer a number of significant advantages in revenue management, receivables reconciliation and accounting accuracy. Implementing this technology, with the support of enablers such as Embat, can transform corporate financial management, delivering tangible benefits and improving operational efficiency.
The ability to effectively segment and manage revenue, reduce errors, speed up accounting processes and improve the accuracy of financial records are just some of the benefits that virtual accounts can offer. By adopting this innovative technology, companies can optimise their operations, improve their competitiveness and position themselves for long-term success in an increasingly complex and challenging business environment.
In a world where efficiency and accuracy are essential, virtual accounts and advanced technological solutions provided by enablers such as Embat are the key to modern and effective financial management. Companies that adopt these solutions can expect not only to improve their financial performance, but also to gain a significant competitive advantage in the marketplace.
