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Digital Innovation

Corporate Liquidity’s Centralization Imperative


Lori Schwartz, Head of Global Liquidity Product Specialists at J.P. Morgan, sat down with PYMNTS.com to discuss the impact of a digital evolution in liquidity management.


Liquidity Becomes Mission-Critical

The need to make real-time decisions regarding cash management has never been more critical. In fact, the very nature of liquidity management is changing — and leading treasuries to pivot to modernization by moving away from physical to virtual accounts.

Any business “that operates, day to day, in moving money, taking in payments, making sure supplier payments happen, it’s extraordinarily important to know where your liquidity is,” says Lori Schwartz, Head of Global Liquidity Product Specialists at J.P. Morgan.

CFO’s and Treasurers must constantly monitor how much money is in corporate accounts, know exactly what’s available and where receivables and payables activity stands at any given time. They must also be able to reconcile those accounts and address funding requirements in a proactive, strategic manner. For executives to have that holistic insight, visibility is key.

Visibility leads to control, which enables optimization.

Lori Schwartz

However, visibility and digitization are not so simple for global corporate treasurers, given the complexity and sheer number of accounts and sometimes millions of dollars in fund flows.

“New technology is coming to the forefront to help that information exchange,” she said, noting that application programming interfaces (APIs) can give firms real-time visibility into banking activities. Not so long ago, linking cash account statements across far-flung systems or operations would have taken days or weeks and extensive testing to synthesize all that data into one centralized presentation.


The Centralization Imperative

Centralized access to information is imperative as firms navigate managing liquidity across jurisdictions and across currencies. This is where virtual accounts come in. Cash can be flexibly managed through virtual accounts, which segment, forecast and address cash positions (and set controls) across an integrated online platform.

Virtual accounts help address one of the biggest inhibitors of high-tech solutions — chiefly, the potential loss of data or information.

Virtual accounts combine the centralization of liquidity while retaining the integrity of all that underlying information. You can direct and separate different activities, entities and projects, but ultimately all of that cash is still centralized immediately and together. It’s the best of both worlds. 



The centralization virtual accounts offer applies particularly well to intercompany lending, which traditionally would require a complex, manual system of comparing and contrasting individual accounts, determining excess and surplus cash positions and creating payments to address funding issues if necessary.

"You have to consider if there are cross-bank relationships in the mix, or if you need to cross-fund across currencies,” said Schwartz. “When you adapt that into a virtual account, you have that intercompany lending happening at the transaction level because all of your entities would have accounts within the virtual account structure. That funding essentially is available immediately.”

The corporate treasurer is an important part of change — and now, they can become the enabler of the products their businesses are offering.

Lori Schwartz

Schwartz said technology deployments, done thoughtfully, can take on at least some of the activities done manually by financial professionals, freeing them up to add value to their companies through insights and robust, strategic thinking.


To learn more about how treasurers are turning to virtual accounts as a key cash management tool, read  "Virtual Account Management: The Future is Now"



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