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Alexa Cook:

Hey guys, welcome back to The Treasury Update Podcast Coffee Break Sessions. This is your host Alexa joined today again by Craig Jeffrey, Managing Partner at Strategic Treasurer. Welcome back, Craig. 

Craig Jeffery:

Good morning Alexa. 

Alexa Cook:

So today we’re going to continue with “What are Header Accounts?” so Craig what our header accounts? 

Craig Jeffery:

Well, from a North American perspective, I would say, those are the that’s the naming convention used primarily by banking structures and in Europe and it’s a method of cash mobilization or concentration where there’s the top account where money flows up to or down from to the different operating accounts in the in the structure there, so they’re quite synonymous with concentration accounts. 

Alexa Cook:

Okay, so you just said they’re quite synonymous, to the concentration accounts, so why do we have some accounts that are called header accounts and then some that are called concentration accounts? 

Craig Jeffery:

I think there might be different views on this but, but my view on this is that it’s really more of a regional naming convention. Certainly, header accounts, it seems like they all have a ZBA type structure to move money, you know physical movements through a ZBA up to down from a header account, whereas concentration accounts typically have that but sometimes there you know, the concentration activity for some of it might be done manually but it’s more of a geographical or regional naming preference. T the other thing that’s different is how this is usually illustrated are drawn, you know, and you know so when we draw a header account structure let’s say I had our account you have several collection-oriented accounts or disbursement-oriented accounts or maybe some various other accounts sitting below this header account that header can’t usually drawn at the center top of the page and the other accounts cascade down in a column on the left or column on the right or multiple columns. That’s how that’s typically illustrated in concentration systems there’s usually two standard drawings. One looks more like an hourglass where you have deposit accounts at the top, concentration account in the middle and disbursement accounts on the bottom, so the sand flows, down to the center then falls down to the bottom of the hourglass and your investment accounts are sweet accounts with hanging off the side of that concentration account. So that’s one way of showing the concentration system others on the concentration side will show depository activity on the left a vertical column of concentration and I’m sorry, depository accounts on the left-hand side moving over you know, on the automated basis, either with a ZBA or an automated staining transfer over to a concentration account and then funding to the right side the vertical list of disbursement accounts, which would come from the concentration account in the middle via some of those same mechanisms like ZBA or certain types of drawdown wires that may be put in place. So that looks more like a like a butterfly so we have a butterfly an hourglass, so we’ve got the header account drawing where the cash sits at the top of the house. 

Alexa Cook:

That really explains kind of sounded those details are like the visual that you kind of explained out there Craig. So, then another one of my questions is what our header accounts used for and I feel like you’ve kind of given a little bit of that, but if you wanted to go into a bit of a deeper dive on that that would be great. 

Craig Jeffery: 

Yeah I guess I’m for efficiency I’d refer people to the what our concentration accounts used for, but to summarize here it’s used as a you know cash mobilization or concentration account. This allows you to quickly see what cash you have for daily positioning making your cash decisions to invest borrow or move funds. And it also helps with the you know isolation activity, which we discussed in another podcast, this is you know optimizing your cash position activity you’re being able to identify discrepancies from your forecast your actual so you can make your decisions for today no it’s something happened a day early, so I need to remove that, from my current projection for today, or it happened later, etc, I need to make an adjustment for it. It also helps on the better forecasting side so, and that’s all, in addition, as I mentioned to the ability to isolate activity which allows you to spot anomalies which could be errors or could be potential fraud. 

Alexa Cook: 

Those are really all the questions that I had so I’m just going to do a quick recap here of what are the header accounts. So really use that it was more of a banking structure named used in Europe so whether it’s the top account where the money flows up or down from into those operating accounts. And again, you said, the difference from the header account to the concentration account was really more so the regional naming conventions, because they both could be using ABA, they could both be using be used for, excuse me, to draw down or for investments and really therefore cash mobilizations or to show us quick cash positions or for borrowing or moving funds and that sort of thing. Was there anything else that you wanted to add there Craig on our header accounts? 

Craig Jeffery:

Well, I mainly wanted to ask for those listening, if you … I don’t think there’s going to be any disagreement on the macro comparison to the concentration account…you know naming convention. There are some other differences, which you know we consider relatively minor but if anybody feels passionate about this and wants to bring up other points and sends a note in, we would be happy to cover it in more detail but…we just want to make sure we’re covering this type of topic or these types of topic at the right level in the coffee break sessions so feel free to send in differences or vent as you see, as you see fit and we’ll see if we could get enough, well, I will respond in some more detail there. 

Alexa Cook:

that’s great thanks Craig and for those of you wanting to write in or vent like Craig said that can be done at podcast@strategictreasurer.com. So, thanks Craig for joining me today on discussing what our header accounts and thanks for all of our listeners for joining in and don’t forget to tune in every first and third Thursday of the month, and like we said if you’re interested in reaching out to us with either more feedback on this topic or other topics, you can send that email to podcast@strategictreasurer.com thanks Craig. 

Craig Jeffery:

Thank you.