In-House Banking: What to look for in an in-house banking technology provider
Managing cash and affiliate relationships can become highly complex for large multinational companies due to intricate banking structures. For these global enterprises, an in-house banking system offers a practical solution. It allows treasury functions to be centralized, reducing the need for each subsidiary to handle its own bank independently.
According to the Association of Finance Professionals, in-house banking offers significant benefits. These include centralized cash management, improved cash visibility, reduced dependency on external financing, and more. By using a shared services model and specialized in-house banking software, businesses gain complete control over their accounts, facilitate fund transfers between business units, reduce foreign exchange (FX) costs, and lower transaction fees, all while tracking cash flows from one central hub.
In-house banking has become even more accessible with advancements in technology, streamlining the process. While there are numerous software options available, it’s essential for treasury teams to know what features to prioritize.
“Finding a global player was very important to us, as we are a global player as well”
Key Features to Look for in IHB Technology
1. ERP Integration
To effectively implement in-house banking, your chosen solution must integrate with your ERP system. An embedded solution centralizes intercompany payments, allowing for the automation of internal transactions such as payments and loans. This centralization enables your team to easily monitor cash flow and resolve potential issues within the same platform.
2. Comprehensive Intercompany Settlement
A robust in-house banking solution integrated with your ERP system should facilitate intercompany payments and automatic settlement within a single platform. This includes automating the netting of accounts payable and accounts receivable invoices across legal entities, reducing fees associated with inter-entity payments. Additionally, these solutions can streamline the reconciliation process and manage internal loans, where subsidiaries make payments directly to the parent company through the ERP.
3. Optimized Automated Payments
With payment factory automation, you can process payments on behalf of subsidiaries seamlessly. Embedded in-house banking solutions can automatically generate journal entries for these transactions. Many solutions also support aggregation of payments and efficient routing, further streamlining financial operations.
4. Centralized Cash Pooling
For improved liquidity management, an embedded in-house banking solution enables the creation of a centralized cash pooling system. This minimizes currency exchange costs and provides real-time visibility of company-wide cash positions. Treasury teams can then make informed decisions about fund allocation based on current financial health.
5. Fraud Prevention
A critical feature of any in-house banking solution is its fraud prevention measures. Integrated approval workflows ensure that payments are only processed with proper authorization. Since these systems operate within secure ERP environments, they leverage role-based security to reduce fraud risk. For multinational companies, embedded solutions also simplify cross-border payments, minimizing potential risks.
Choosing the Right IHB Technology Provider
Once you understand the key benefits and features of in-house banking technology, the next step is selecting the right provider. An ideal solution should reduce the time required to manage your in-house banking operations, centralize data such as accounts payable and receivable, and automate routine tasks. If your business already uses an ERP, it’s wise to select a solution that integrates seamlessly with it, ensuring real-time data synchronization and up-to-date information on cash flow and banking activities. Engaging an external consultant can help guide the selection process to ensure the best fit for your company’s needs.
For companies using Microsoft Dynamics 365 Finance and Operations, SK Global Software offers a robust in-house banking solution with features like intercompany netting, real-time bank balance updates, automated bank statement generation, and streamlined reconciliation of internal and external transactions within one system.
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