Role of Technology in Healthcare Construction

Centralised visibility and control of cash are the keys to effective cash management. However, managing cash across multiple bank accounts can be challenging, especially for large organisations with global footprints. APIs are one of the useful tools in this regard, allowing companies to link their ERP, TMS, or system of record to bank accounts worldwide, providing real-time visibility to account balances, transactions, and other critical data.

A cloud-based solution is an alternative option for centralising cash management. These can leverage APIs to aggregate data across banks and accounts, improving visibility into company cash, enhancing forecasting capabilities, and providing better trend analysis.

Automated balance and transaction reporting is also essential to streamline cash management and support the transition to centralised cash and liquidity management. It establishes the foundation for bank and account rationalisation and saves time for staff by allowing banks, fintech, and other providers to track transactions in both physical or virtual accounts, sub-ledgers and intercompany loans.

Besides leveraging technology to improve visibility, businesses should also employ a centralised liquidity structure. The three main options to centralise structure include physical cash concentration structure, notional pooling, and virtual treasury. Each structure facilitates efficient cash and liquidity management.

Physical cash concentration structures have been around for decades and are a proven tool for centralising funds from multiple operating accounts and legal entities to a single concentration account. Advances in technology eliminate a lot of groundwork by outsourcing intercompany loan tracking and administration.

Notional pooling facilitates centralised cash management without commingling funds or requiring intercompany loans. Treasury gains full visibility and control of liquidity across the organisation, facilitating central management of investments, funding, foreign exchange (FX), and other decisions.

Virtual treasury, also known as an in-house bank, provides the most centralisation and control for managing cash and liquidity. A designated legal entity barely uses a handful of physical accounts to manage company cash, while sub-ledgers managed through an ERP or TMS, or virtual accounts outsourced to a bank, give local entities or lines of business access to their funds. This provides the most centralisation and control to an organisation as opposed to a virtual treasury which involves upfront work.

Factors like the number of operating accounts, the currencies involved, whether to allow locations or subsidiaries to retain local control of cash, and the resources and systems in place to help automate cash positioning, ledger entries, and other activities should be considered as each business decides on the best technique for them. Banks can help model various scenarios, identify necessary connectivity, and offer guidance for a smooth implementation as businesses centralise and improve their liquidity management processes.