Virtual Sub-accounts Simplify and Save Time

Virtual Sub-accounts Simplify and Save Time

by Carol Hampy, Deposit Escrow Program Manager for Pinnacle Financial Partners

For businesses that receive deposits from many different sources and need to reconcile and report on each source separately, virtual account management (VAM) can be a game-changer.

The need to perform separate accounting for many different segments of cash may stem from regulatory or legal requirements, or it may be a necessity driven by the business model or industry.

Whatever the reason, having the power to independently open and close an unlimited number of separate virtual sub-accounts, all attached to one master account via an online portal, can solve a lot of headaches for a multitude of industries, including:

  • A property management company that serves multiple neighborhood homeowner associations (HOAs) that have dues-paying residents and a reserve fund as well as client properties with renters paying security deposits that must be held until a future date when the leases are terminated

  • A law firm that represents multiple sets of class action clients (or the plaintiffs), resulting in settlement funds that must be held during the required timeframe while claims are being processed

  • Organizations with a large global footprint that need to have full control over their cash liquidity across locations

  • A municipal or state government that receives federal grants from multiple programs, necessitating regular reporting on the appropriate use of the funds

  • A public utility company that serves multiple communities and needs to keep separate books on each to abide by unique restrictions regarding reporting and the ability to earn interest

Virtual sub-accounts share features associated with a regular bank account:

  • Unique account number
  • Separate reporting that captures balance information and activity
  • Automated statement generation
  • FDIC coverage
  • 1099 Reporting when applicable

All accounts are accessible in one user-friendly portal, where you can view balances and activity quickly and easily and transfer money between accounts to cover deposits and disbursements. For many clients, this adds up to savings because it avoids the fees of opening so many separate traditional bank accounts. You have the option to allocate interest earned on balances among your sub accounts, providing full flexibility.

And when it comes to labor-intensive formal reconciliation and audits, your accounting team can focus on the master account.

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