Benefits of Using a Single‐Account Cash Management Structure

• Date: 01 November 2015
• Published date: 01 November 2015
• DOI: http://doi.org/10.1002/jcaf.22097

35

© 2015 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22097

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Benefits of Using a Single-Account

Cash Management Structure

Kurt Fanning

Proper cash man-

agement for

multinational

firms is an important

concern for treasur-

ers. The treasurers are

responsible for deal-

ing with their many

subsidiaries and their

corresponding mul-

tiple bank accounts

and currencies. This

complex treasury

structure is expensive

and burdensome. One

area that can provide

major cost reduc-

tions is the use of a

single‐account cash

management system

for collection and payments.

Firms will be able to change

from complex banking struc-

tures, encompassing thousands

of accounts at hundreds of

banks and a wide range of

currencies, into a cash manage-

ment structure using just one

account. Currently, firms need

to invest significant time and

effort to create and operate a

single‐account cash manage-

ment structure. Firms attempt-

ing to create a single‐account

cash management structure

face many legal, tax, and tech-

nology obstacles. Realistically,

it will be several years before

most firms are able to opera-

tionalize a single‐account cash

management structure. How-

ever, several recent changes in

the world’s legal and political

environment are helping the

creation of a single‐account

cash management system.

Further, the creation of infra-

structure for a single‐account

cash management

system is occurring

in the developments

such as in‐house

banks (IHBs) and

shared service cen-

ters (SSCs). Couple

these developments

with advances in

enterprise resource

planning (ERP)

software and other

technologies, and

single‐account cash

management systems

are moving closer to

a practical reality.

Treasurers should be

watching these devel-

opments closely and

exploring ways to move their

firms toward a single‐account

cash management system.

LEGAL AND POLITICAL

CHANGES

A major change aiding

the development of the single‐

account cash management

system is the Single Euro Pay-

ments Area (SEPA) initiative.

The SEPA initiative attempts

to create a single market for

The implementation of single-account cash man-

agement systems provides corporate treasurers

with better visibility and greater control over cash.

Firms should reexamine their internal processes

and look for opportunities to implement a pay-

ments-on-behalf-of (POBO) and collections- on-

behalf-of (COBO) as part of a single-account cash

management system. It provides significant cost

savings and reduces risks associated with cash

management. Many financial institutions such

as banks have set up the services needed to

do single-account cash management. Therefore,

treasurers should look to single-account cash

management systems as a means to achieve

the next level of efficiency in cash management.

© 2015 Wiley Periodicals, Inc.

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