Effective Bank Account Management

Jon Paquette  0:11   

Welcome to The Treasury Update Podcast presented by Strategic Treasurer, your source for interesting treasury, news, analysis, and insights in your car at the gym, or wherever you decide to tune in. On this episode of the podcast host Craig Jeffrey sits down with Jon Paquette senior financial solutions expert at TIS to discuss bank account management, protecting the doors to your most liquid assets. Topics of discussion center around the essentials for managing big accounts effectively, the common issues companies are facing today, solutions for cash flow visibility and more. Listen in to find out how to position your company for success. 

 

Craig Jeffery  1:02   

Welcome back to the Treasury update podcast. 

 

Jon Paquette  1:04   

Thanks Craig. Good to be here.  

 

Craig Jeffery  1:06   

Yeah, Jon is the VP of solutions at Treasury Intelligence Solutions or TIS and I’m glad to have him back. But before we go into the topic, in depth, love to have just a quick review of your career highlights and a little bit about your background and what do you do as the VP of solutions at TIS? 

 

Jon Paquette  1:26   

Yeah, happy to do that. So, you know, started my career really in the treasury practitioner space and spend about 15 years working for different companies and different treasury roles. Most recently, I oversaw treasury for an 8 billion in revenue healthcare organization, made the jump over the technology side back in 2019. That’s when I joined TIS and I’m currently serving as the VP of Solutions for our US market. So, in this role, I’m overseeing our customer onboarding team, our solutions architects, and our partner engagement onboarding functions as well.  

 

Craig Jeffery  1:57   

You know, as we as we shift from some of your background into the talking about bank account management or BAM as you’ll hear me say and hear us talk about a lot, maybe we can begin with what are some of the issues before we get into the… what goes on with BAM? So maybe talk about common issues and methods companies are using to manage their bank account processes, bank account data? How does that work? 

 

Jon Paquette  2:27   

Right. Yeah, I think some of the classical issues are kind of the most quintessential issue is that organizations don’t have confidence that their records are actually up to date. You know, this questions around did we add that new batch of accounts that we opened last quarter do we update our signers to the most recent signatory update? You know, did we incorporate that legal entity name change? And you know, I think depending on the solutions companies have in place for bank account management there’s just no way to tell, right. You know, the other issue that we see a lot of companies having is controlling actually who has access to those records. So, for most companies, you need to give access to your BAM records to a broad range of people within the organization. There’s just a lot of people that use that data beyond just treasury. And there’s no way to kind of segregate who has control over what or you know, to make sure you’re avoiding things like incorrect data changes or accidental changes, you know, people deleting data accidentally within those records. You know, another issue I think, is tracking the documentation that goes along with those bank account records. So, one thing is, you know, the repository of bank account information, but then you also want to track your latest and greatest signature cards. So we see a lot of companies still tracking those on a shared drive then accessing that document not being sure if it’s even the latest and greatest or even you know, believe it or not in file cabinets, you know, a lot of people are still printing out these documents and storing them in file cabinets as well. And then probably the, you know, the last one I’ll point out here is tracking too little information. So, I think there’s just an overall, you know, lack of sort of guiding into best practices with most BAM solutions. They don’t tell you what you shouldn’t track for the most part. So, when you go to leverage them for the purposes that you would for your bank account management records, whether that be like audits, you know, KYC reviews, regulatory filings, you find the actually don’t have all the data points that you need, and you’re left kind of hunting around to fill in the gaps there. 

 

Craig Jeffery  4:22   

And, you know, one of the things I was I was sort of expecting you to say, was related to like file cabinets, not just people store them in file cabinets, they’re in different file cabinets and different floor, some in legal, some in treasury, maybe some spread out over the globe, but I guess I guess maybe that’s part of what you were saying. They’re stored in different places. But Jon, you know, this idea of you mentioned, some people use a shared drive and some use file cabinets. What do you see when people are dropping stuff in a shared drive? Do you find they go back and scan everything that’s been historical index them some are sticking into the shared drive, or did they just started a point and move forward? So, they have this kind of hybrid environment?  

 

Jon Paquette  5:12   

Yeah, I’d say for most companies, it’s not possible to go back and scan every single one of those documents in so you have the full history of signatory changes within those documentation. They typically just start at one particular point in time, you know, both for administrative reasons and because of the reasons that you pointed out all those, you know, paper based documents are probably stored in all sorts of different places, file cabinets in different geographies, even in people’s, you know, desks, and the most parts they can in most instances they can’t actually locate all those documents to scan them all in. 

 

Craig Jeffery  5:46   

I liked your point about the access, you know, too much or too little, is a key part but I want to move to the you know why is bank account management important? It seems like this might be it’s a necessary evil, but why is it necessary? Why is it essential? As you reflect on that maybe you can bring up some of those examples you had about the issues. How do some of those issues or limitations spin out into bigger, bigger problems? You know, for a variety of reasons, but maybe start with why is BAM important and essential?  

 

Jon Paquette  6:24   

Yeah, I mean, it’s definitely essential. It’s definitely a necessary evil, as you mentioned, and it definitely creates bigger organizational problems if it’s not handled efficiently. So, you have treasury who’s always the kind of the gatekeeper of this information. And then once that, you know, kind of retain this information, make sure it’s up to date. But then the BAM information is kind of used by a lot of different departments within the organization as well for part of their processes. You know, tax departments, for example, might have to access bank account management records, to know you know, certain account information in the accounting department as well right. He’s known what accounts are open wide, what accounts are closed. Obviously, you know, every single cash account needs to be recorded on the GL right, so they have actual accurate financial records. So, inaccurate bank account management record can have this ripple effect where we’re passing bad information downstream. I think you also see a lot of issues come audit time, right? So, all treasury departments know that you have to provide that listing, that complete listing of your open cash accounts, including who the signers on those accounts, as part of your yearend confirmation process. And it’s kind of often a panicky moment for a lot of organizations not knowing if the signer records are actually up to date. And if you’re giving accurate information about the complete list of accounts, as well, who are the individuals that actually are able to confirm those accounts. Similarly, I think you know, for FBAR filing time, you kind of have similar issues coming in there where it’s difficult to pick out what accounts are actually in scope for FBAR filing, who the signers are on those accounts. And you know, I guess who were the signers at any point during a given year. A lot of BAM records just have the latest and greatest right? They don’t have that version history but for FBAR filing reasons you need to be able to track who is a signature signatory at any point during the year because those individuals have other requirements as well. And even you know, related to FBAR filing if you have to file for your so-called virtual signers, that’s a key data point that a lot of them solutions don’t really track right. 

 

Craig Jeffery  8:24   

Jon, I appreciate that. Your comment about too little information, I think is really borne out in this FBAR filing question, you know, that idea of who are the signers and if they’re a signer at any point in time of the year you have to know that just because someone was on and someone was off. If you don’t have a date aspect you, you might have to do additional filings because, of course the requirement. I think the other piece too on that is you have to there are certain requirements of who would have to file if it’s a non-US entity and I’m trying to be brief here and not specific on the FBAR rules. And the person is a US citizen or a US tax or someone who pays us taxes has to file taxes. They’re considered a signer and you brought up that third point about the virtual signer someone acting on their own or in conjunction with someone else who can move funds is considered a signer for purposes of FBAR, even though the most of the rest of the Treasury will just say no, that’s not a signer. FinCEN designates it that way. So those are those are three types of classifications that you can have too little information on so that’s a really good point. 

 

Jon Paquette  9:38   

Yeah, exactly. And there’s no way to turn back the clock and then go back and retro actively track that information. So, it’s you know, companies definitely end up scurrying to try to scrape together those data points come filing time. 

 

Craig Jeffery  9:50   

One of the things you know, that seems interesting is when I think about bank account management, there’s the process of the signers, the services, the controls, the documentation, you know, all those things that you mentioned. It also seems like there is a there’s an aspect of bank account management that you’d like the system to help you make sure you’re following your policies and policies are, I should add these services on these types of account, debit filtering or blocking these types of controls or information reporting. How many people view that as part of bank account management now is that viewed in a disconnected fashion? I’ve gotten that policy, but I don’t have to comply with it with what I’m doing that account management or I will need to incorporate those things. So systematically I’m controlling for to make sure we’re following their policy. 

 

Jon Paquette  10:49   

Right. Yeah. I mean, I think it’s starting to get into people’s minds now more so. So yeah, I mean, one thing that we do in our product is we provide a lot of workflows or approval parameters for opening the bank accounts, making changes, even making selections about which bank certain accounts going to be opened at and for a lot of organizations, that’s an eye opener, you know, they haven’t really thought about those processes before, particularly if they’re, you know, been managing things really through Excel that doesn’t, you know, facilitate any sort of workflow or approval process. There’s no way to kind of hard code those controls in there, right, to make sure that they’re actually being followed. We are seeing more and more organizations have that mindset specific to the services which is an interesting point, though, you know, that will definitely probably comes up even less I would say, organizations really realizing okay, we’re opening up a new cash accounts market, we need to have a debit filter in place or you know, a debit block in place from the accounting part of our account opening policies. That’s an interesting point, though, for sure. And yeah, so I’d say that we could, organizations can definitely pay more attention to that. 

 

Craig Jeffery  11:50   

Yeah, in the paper world, that’s almost impossible, right. But in the automated world, it becomes, like you said, it can become a workflow or it can be become data that’s captured that you could report on or track or manage it. It’s fair to say, you know, TIS and maybe on classifying your system, but we view TIS as a treasury aggregator with a strong visibility component, and also, you know, additional features and modules if you will, that include bank account management. So Jon know what, what are people using for BAM, you mentioned paper, but there’s also systems so what are what are people using for bank account management, if it’s not just paper, and how are they going through the mindset of the process of picking the types of solutions that they pick? And I guess one of the questions who might be who is picking up solutions? Is that always treasury? Is it accounting sometimes? Is it someone in legal who cares about legal entity activity? 

 

Jon Paquette  12:52   

Yep, yes, take that first point. I’m still surprised by how many organizations seem to be using Excel for bank account management. It’s funny, you know, it seems like predominantly when we have these conversations, it’s organizations looking to move from Excel to something more automated and you know, reasons why I’d have to think that every company has Excel right? First of all, it’s just it’s available to use. Secondly, it provides the ultimate and flexibility right so you can track any sort of data element that you want to your accounts, you know, grouped in any sort of structure that you want to correspond suite relationships, all that type of information. But obviously, the issue there is it doesn’t provide any sort of version control or auditability. So, you never know if those Excel records are actually up to date. And when we talk to companies about why they haven’t moved off Excel, it seems to be predominantly because they’re, they view the solutions that replace it as being nothing more than you know, excel in the cloud with a different UI. You know, there’s not enough value there it seems like for them to move away from the flexibility that Excel provides toward some other solutions. And, you know, I think that this is really what we need to what needs to be pushed for companies, you know, even relate to the point you brought up before about tracking services, right tracking your policies and procedures, and treasurers are smart, and they need to see the value of a BAM solution to be able to submit to move to it. So, something we definitely try to push within organizations as well. And in terms of who’s being involved in the decisions for a bank account management tool, I think it’s, in our opinion, it’s always led by treasury. It just seems like for most organizations treasury is the gatekeeper to the bank relationships, the bank account records, but you are seeing more and more you know, accounting being brought into those decisions. Departments, you know, those the that manage legal entity records, for example, are being brought into, if they’re really looking for something that can act as both as a repository for information, but also a workflow to organizationally to manage a lot of these tasks. So, we see kind of a broad group involved in those decisions these days. 

 

Craig Jeffery  14:50   

I think that makes a lot of sense. I guess we’ve seen a few times where we work with treasury and we get into the how are they managing bank accounts and they have to use something that legal put in place, which is like usually really well designed for legal entity management and they added a few fields for bank accounts and a few things like that. But it’s like you can tell this was designed for the lawyer side of the house, not for not for treasury. It’s almost nonfunctional for treasury. Jon, what are the essentials for managing bank accounts effectively, whether you use a system like yours, or something else, how should we be thinking about managing bank accounts in the most effective manner?  

 

Jon Paquette  15:37   

Yeah, I think the essentials are really you know, solving that classical problem around version control. You have to know the records throughout the day, right? That’s the most important thing about bank account management. So having that you know, that tracking of changes those workflows and approval processes, that auditability see that you know that the most recent changes have been incorporated into the tool is actually absolutely critical for moving off Excel towards something more advanced. I think the solution is also to be holistic. So, most companies don’t want to just track bank accounts. They want to track bank accounts, you know, signer information at a detail level for FBAR filing like we mentioned before nationalities and things like that. They want to track legal entity level information. So, they can use that information for KYC reviews and things like that, right. So, it needs to cover a lot of different data points that are, you know, associated with bank accounts. I think another thing a lot of companies are pushing for these days is to have something that’s more than just a repository of information to actually get some reporting out of it. So being able to run reports based on the database to see what your account structure looks like what banks are using in certain regions, how many accounts you have in certain currencies. These help a lot I think with just sort of having a good grasp of your construction and identifying inefficiencies. You know, document retention, like we talked about before, getting away from file cabinets and share folders and things like that. That’s something that you know, is essential to a BAM solution. And I think you know, more to high level something that helps with this managing of a decentralized process, so, you know, another common issue we see for organizations is they have accounts being opened by different departments across the world, right, different regional finance teams. And so, they’re looking for a BAM tool that helps them wrangle that into some respect right so that they can receive a request open a new bank account, they can make decisions centrally about what bank that’s open at, right, they can be kind of alerted to what’s happening at these regional finance levels. And make sure that all the kind of downstream processes, the adding of these accounts to the ERP or the TMS or whatever it might be, occurs as well. So that’s a critical thing I think most organizations are looking forward to. 

 

Craig Jeffery  17:44   

You had mentioned account validation earlier, I guess, you know, this idea of you sent a letter to the bank to close an account or to cancel a service or add a service or change a signer. Now, the idea that everything happened as expected, they received the letter, that the letter was routed to the right people who are going to make those changes that those changes were in be made and they were made accurately. There’s dozens of points of failure that can occur that can keep these things from being synced. What you have in your files are in your BAM system may or may not reflect what is actually at the bank. And it’s surprising how inaccurate they are. And I’ll just I’m getting to a question, but you know, we have we have some customers who want account validation done every year an audit of sorts, to make sure that they’re catching differences, closed accounts or closed, services were added or deleted, signers are accurate. How important is account validation? And has that changed a bit, become a bit more important, a lot more important or what what’s your view on that? 

 

Unknown Speaker  19:01   

I mean, I think it’s really important to be honest, and a lot of customers are bringing up specifically this point as well. They you brought up about just sort of validating that what they have on file matches, what the banks records are and how difficult that process has been historically because I mean, you’re right, you could think that you closed out an account but then you know three weeks later, maybe a you know a credit comes into that account that based on the bank’s policies automatically reopens it and then nobody realized that that the accounts been reopen for you know a two year period or something like that. You’re paying account maintenance fees, audit and things like that. So, I think there’s a strong emphasis on it. To some extent BAM solutions can solve it, you know, there’s a there’s good auditability there. There’s the ability to run reports of what you have on file that you can then compare it to the bank’s records. You can also run, you know, I guess, you know, almost internal audits on your account information so that different people regionally or verify account information that those accounts are open that the signer records are correct. So, you can kind of, you know, spread the responsibility to the individuals responsible. But this is actually one of the things I’d love to see the banks solve via API, just the ability to be able to initiate an API call and pull in all your bank account records and sign a record so that you can compare them to a bank tool and just make sure the two-match read. So, I know a lot of people talk about eBAM, opening up new bank accounts, changing signers but just the ability to be able to reference that information I think it could really open up the door to some interesting capabilities for the FinTech. 

 

Craig Jeffery  20:31   

I like that idea that validation via API’s that’s awesome. Any final thoughts or conclusions that you want to leave the audience with, related to protecting the doors to your most liquid assets? Right, every account represents a point of exposure, and a point of cost? Any final thoughts? Either emphasis or things maybe you haven’t covered?  

 

Jon Paquette  20:54   

Yeah, I mean, I think the one thing we haven’t covered yet is it you know, bank account management is typically thought of as this administrative task, but then you can do some pretty advanced things with BAM these days are actually you know, somewhat strategic for the organization. For example, bank account management systems that have APIs make it possible to really keep your bank account information, your signer information, legal entity info in sync across multiple different systems. So, you know, you’re using a BAM solution as your central source of truth, but also synchronizing those records to ERPs or treasury management systems, whatever it might be, seamlessly from that one destination which is, which is a pretty cool thing that you can do these days. Another thing that you know a lot of organizations are talking about is BAM integrations back to identity management tools so that you can kind of proactively be identified. If you have a signer within your BAM records that actually left the company right this prevents a lot of those “Oh no” moments that you might have at year end when you realize your signer records throughout out of date and in the individual is even with the company anymore. So, you can get pretty automated there as well. And, you know, you can really leverage a lot of advantages with BAM by integrating it with other data sources as well, you know, primarily the systems that generate your bank reporting that are pulling in your electronic bank reporting from your banks, or your payment data, it’s possible to get almost automated with your FBAR reporting filing by leveraging these multiple different data elements too. So, your bank account management records have your signer records, they know your foreign bank accounts, they know the individuals who had signing authorities at different points during the course of the year. You can then combine that with statement information to pull other FBAR filing variables such as that maximum account value balance during the course of the year, right. So, you have these multiple different data sources. And then if you have a good reporting tool as well, a click of the button, you’re combining all these data elements you have all your all your points that you need to really file for FBAR. And that you can do similar things with risk management too leveraging your bank account management solution. So, you have all the detail you have you need there in terms of your banking landscape where your accounts are open, and then you can combine that with data sources that are showing your transactional balance activity to be able to understand if you’re, you know, holding high balances that certain banks and their credit rating recently took a dip or something like that, right? So, there’s this, the possibilities, all sorts of things like that leveraging your BAM solution as a data point. So very cool things are happening with BAM these days. 

 

Craig Jeffery  23:26   

Before it before we end the podcast. I wanted to follow up on one of those items. You talked about connecting BAM to identity management tools. Are you talking about connecting to like the HR database for exactly employees or things like SAML, or your federated system where it’s like once they’re taken off of the system records it also validates signers? What are you referring to on the identity management side? 

 

Jon Paquette  23:55   

Yeah, exactly. So that the systems that are really managing the employees in your organization and what systems they have access to or even the fact that they are employees that the organization’s creating integrations back with those systems and be able to tell if people left the organizations that are listed somewhere in those bank account records is the thing that’s actually possible these days. 

 

Craig Jeffery  24:15   

Excellent. Jon, thank you so much. For your time talking about BAM protecting the doors to your most liquid assets. Appreciate it. 

 

Jon Paquette  24:21   

Yeah, thanks again for having me. 

 

OUTRO  24:26   

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