This is the first of Churpy’s weekly blog posts. In this blog, we talk about how to automate reconciliation 100%, centralized treasury management and optimize liquidity management. We will review the topics under problem definition, how it works and finally, provide a value proposition for the CFO.
The problem statement:
1. How do rapidly growing businesses know who paid them? Do CFOs and Accountants have sufficient and specific information to identify all of their debtors? Can they utilize the financial data available in bank statements to instantly allocate payments within the Accounting systems or ERP? How much balances are currently held as unallocated debtor transactions in control accounts (often referred to as suspense accounts)? How old are some of those unallocated debtor transactions?
2. What other follow-on effects emanate from aged suspense account balances?
Today we’ll largely speak to problem statement 1 above.
The Background:
Businesses have transitioned to mostly accepting digital payments in the wake of 2 years of a sustained COVID pandemic. Cash transactions are reducing significantly and debtors are pushing to use cheaper bank and mobile money rails to pay monies owed to their creditors.
The Challenge:
Simply put, as an Account Executive, how do I attribute inbound payments against each debtor? At scale i.e. relating to thousands of invoices, with some paid partially over time, through different payment channels such as bank EFT, RTGS, cheques, mobile money; into multiple branches each managed independently, and operating in multiple countries, having promised my debtors a seamless Omnichannel repayment experience? The main challenge that faces accounting teams boils down to RECONCILIATION. At some point, an increase in headcount and technology such as Robotic Process Automation at the problem yields marginal gains.
So you ask, what is the silver bullet? An ultimate solution? and that is, the Churpy VIRTUAL ACCOUNTS product.
What is a Virtual Account?
In the simplest terms, a virtual account is a unique bank account number given to each debtor. The virtual account becomes the pay-in account to the respective debtor tagged against it. For example; let’s take Company A that has 2 debtors. Those two debtors would be allocated virtual account no.1 and no.2 respectively. When either of them decides to pay, they will respectively pay into those 2 accounts at the bank of Company A using their existing preferred payment methods.. and Voila! The headache of attributing incoming payments from one’s Debtors is solved instantly, and subsequently RECONCILIATION follows soon after.
How does it work at bank level?
Through our close partnership with NCBA Bank, Churpy has integrated into the core banking layer — the 2 virtual accounts, as with the myriad of other virtual accounts that can be generated on demand for subsequent debtors are all mapped against the actual account number of Company A. Company A therefore receives the real money and Churpy only handles the payment payload information. The beauty further lies in the fact that the existing preferred payment methods of the 2 debtors are not disrupted, as they can still pay into Company A via mobile money, Pesalink, SWIFT, EFT, Cheque, etc. Even better, your debtor elects to then use the cheapest payment option.
NCBA operates across East Africa so rapidly growing customers like company A can leverage our partner bank’s regional presence.
To cover other non-EA countries across SSA, we are soon announcing a partnership with a leading regional bank that gives us coverage to more than 36 markets in SSA. With this, all your Pan-African collection, liquidity and treasury management needs are sorted out. So easy!
How does it work at Company A?
We at Churpy, have built integrations to the most common ERPs in this market i.e. SAP, Sage, Quickbooks, Xero, Zoho etc. That allows us to instantly issue virtual accounts to each of your debtors, update bank and cash GLs at ERP level and reconcile either cash orders and/or invoices (partially or fully) at ERP level instantly. As a CFO, you have a reconciled position at near real-time and automated month-end closing among other manual tasks that are usually highly manual e.g. downloading bank statements and in the process managing risk.
Our product is API-first led and therefore enables software engineers to build complex use cases from financial data, leveraging existing bank channels.
What value proposition do virtual accounts offer the CFO?
- Allow debtors leverage bank rails even more especially for the reason that businesses like to settle through bank transactions.
- Virtual Account Management (VAM) enables the segregation of activity under a single, centralized bank account, while retaining the visibility and reporting needed to facilitate reconciliation and internal accounting.
- For the CFO with a keen sense for cost containment, Virtual accounts can also be a huge source of savings on your bank fees and internal resources e.g. you do not need multiple paybill numbers to manage multiple branches therefore reducing reconciliation inefficiencies and saving real green US$ costs.
- Rationalize the number of bank relationships and resulting bank accounts therefore bring to the fore, a streamlined liquidity management position.
- Increased visibility across multiple Op-Cos and Business units.
If you have any questions or feedback, feel free to reach out to info@churpy.co or sales@churpy.co