VIRTUAL ACCOUNTS AND PAYMENT FACTORIES: FEEDBACK FROM ANDROS

Virtual accounts are gaining traction in cash management. What are their purpose and benefits?

Elise Hoyet: Virtual account numbers (or virtual IBANs – VIBANs) are conventional IBANs that serve as references from end to end of the payment process. They are used to issue and receive payments, while the transaction itself is recorded on a standard master account.

Virtual account numbers mainly participate in facilitating bank reconciliation by better identifying inflows. You can issue as many VIBANs as there are payers. They are used for payments just as conventional IBANs would be.

Virtual account numbers may also contribute to more centralized cash management as was the case with Andros. They facilitate the management of payment factories as they help clearly identify the subsidiaries recording inflows and outflows. The corporate client receives statements for each virtual account, while having fewer “real” accounts to monitor.

At Andros, how have virtual accounts streamlined your processes and improved your day-to-day cash management?

Mickaël Djafarpour: Virtual accounts are another brick in the wall of innovations that we are gradually building. They seemed like a logical step when we began looking for ways to enhance our cash management, for instance by rolling out a cash pool and a payment factory with a global scope. Both solutions soon appeared as an attractive way to work more efficiently.

Historically, our subsidiaries worked totally independently, each using their own cash management tool. In 2021, we decided to funnel all cash flows through a central treasury tool.

Our processes are now simpler and smoother, and our clients, whether internal or external, are very satisfied with the new system. Virtual accounts are an essential building block in this process of continuous improvement. Subsidiaries are now free from some of the most time-consuming tasks. Data input and reporting have been fully automated and our subsidiaries no longer have to report their cash positions to us each month. Furthermore, intra-group flows are more easily recognizable, traceable and integrated in the various ERPs. This is a real time-saver for local teams, allowing them to focus on higher added-value tasks and gain in efficiency.

The impact is non-negligeable, financially and operationally. To put some perspective, when the roll-out of virtual accounts is finalised, we will have reduced our subsidiaries’ bank accounts by two thirds, at constant perimeter.

In addition to simplifying the implementation of payment factories, how do virtual accounts help you reduce risks?

Mickaël Djafarpour: Risks are mitigated mostly through centralisation. First, we contain operational risks by centralising cash management responsibilities in our head office to avoid loss of expertise. Second, fraud risk can be reduced by introducing central auditing tools. Third, currency risks are limited by being managed centrally by our head office rather than by each subsidiary, with the creation of natural hedging.

Also, by harmonising and modernising cash management tools (TMS and ERPs), we can avoid obsolescence and incompatibility. Last but not least, cash pools allow to optimise investments and debt, and share risks.

Halfway through the project, what are your initial thoughts on this implementation?

Mickaël Djafarpour: This is a key project for us. These next two years, the solution will be gradually rolled out in all our geographies over 6-month periods. The project relies on a tripartite relationship between Andros, Societe Generale and our ERP vendor. We worked together in project mode, listening carefully to each other. All the teams were very proactive and needs were clearly identified well ahead. We are now gradually rolling out the project in our European subsidiaries, taking into account local compliance rules, tax regulations and ERP capabilities.

Our main idea was to make it a structural project, placing us ahead of the curve and enabling us to focus on other subjects without having to modernise our long-standing solution. That is why we took the opportunity of the introduction of a payment factory and virtual accounts to shift to SWIFTNet and XML connectivity.

Admittedly, this involves change management and some training. However, once all staff are used to the new structure, it works very smoothly.

Banking-wise, what are the implications of such transformation?

Laure Desideri: It requires an overhaul of the bank account structure and therefore significant change management. First, you need to determine the accounts to be kept and the VIBANs to be created. Then, you need to communicate on these changes, train teams and set up cash management tools.

Rigor is key to managing such projects. At Andros, we dedicated two project managers to the topic, providing support that we gradually adjusted to our needs as the project gained traction. At each stage of the process, the Andros teams made every effort to discuss all the issues involved and incorporate as many tools as possible to optimise their cash management structure and make it sustainable over time. The first phase of the project consisted of continuous co-building with substantial input from the respective technical teams. It was a highly rewarding collaborative effort for all three partners.

Virtual accounts and payment factories are no turnkey solutions that can be replicated as is from a group to another. They are unique projects in which a bespoke solution is developed for clients based on their specific challenges, organisational structure and corporate culture. Tax requirements must also be taken into account at all stages of the project. Not to mention the need for change management.

In conclusion?

Mickaël Djafarpour: The project has proved successful thanks to the commitment of the Societe Generale teams. I would like to thank them for their everyday involvement, availability, attentiveness and responsiveness in the management of this project, especially Izaskun, Laure and Sébastian from the Cash Management team.

Laure Desideri: The project was made possible – and completed in record time – thanks to the agility, curiosity and open-mindedness of Andros’ cash management teams. I would like to thank Gwendoline, Christophe, Philippe and Axel for their dedication to this common project.