Managing Multi-Currency Accounts across multiple entities
Next, we’ll share some examples of how our MCAs work with businesses with different structures—and how the MCAs might make managing multiple entities more efficient.
First: let’s imagine we're leveraging virtual account management technology from the banks, but we have a ledger system that's built into our core transactional database which we’re using to maintain the accounts.
CP Widgets: A separate account for its Australian division
So let's say you are CP Widgets Inc. You open a series of Multi-Currency Accounts, several different currencies. This gives you the flexibility to send an in-country payment for pennies a transaction, or a SWIFT wire payment for dollars per transaction.
You can also receive both SWIFT wire payments and in-country payments in a number of different currencies, and push them out as well.
With our network you can send outbound payments in 145 currencies, debiting any one of your MCA accounts.
Separate accounts for separate entities within your business structure
So let's say you're holding an Australian dollar account, and you have Australian subsidiary, or an Australian division, and you want to segregate those funds flows. You want to separate those flows from your US entity.
You can open up a separate MCA for that Australian division, a virtual account that's connected to your US business, even if that division isn’t a legal entity.
You can initiate payments by debiting funds in that Aussie dollar account to make payments in other jurisdictions around the world.
From an accounting perspective, it flows through your reconciliation directly to the correct division, rather than being run through the parent company.
Now you have a way to reconcile and segregate all of your different business flows depending on what you're ultimately trying to achieve.
You can also manage global collection in 25 currencies. You can receive funds and convert with your MCA.
You can net against outbound payment requirements, and continue to fund those accounts so that you can make outbound payments in those accounts as well.
For all intents and purposes, our MCA operates just like a ‘normal’ transactional account for that division, accessible on a single platform.
Maintaining local accounts in Canada and the US
Let’s look at another example: managing US-Canada flows with a USD account in Canada.
If you're operating in Canada and you're doing business internationally, you probably have your own US dollar bank account. In all likelihood, though, you have a US dollar bank account domiciled in Canada.
The key deficiency of that account, domiciled in Canada, it that it's not connected to the ACH network. Ultimately, you can't receive ACH payments. You can't make ACH payments.
You can only receive international SWIFT wires.
If someone pushes a SWIFT wire to you, to your US dollar bank account in Canada, they’ll typically pay a fee of 15 to 35 dollars to initiate that wire.
And when that money comes into your bank account, you'll also pay a lifting charge to receive those US dollars, somewhere between 15 and 20 dollars, for each inbound payment.
When you connect to a US dollar account that's domiciled in the United States, even if someone pushes a Fedwire to you, it's going to be less expensive for them. A domestic US dollar wire is typically less expensive than an international US dollar wire when compared to a US dollar wire sent to a US dollar account domiciled in Canada.
There's also going to be no lifting charge on that payment when it credits to your USD-domiciled account. No one is going to charge you anything to receive a payment in that account.
Even better: if you're sending or receiving payments via ACH, the transfer that the customer initiates to you is going to be received in your account and guaranteed full value. It will typically arrive the next business day, as guaranteed funds, for all intents and purposes.
Let’s say you're a Canadian entity and you have a US dollar bank account at Bank of Montreal in Toronto or Calgary or whatever the case might be.
The key benefit of Corpay’s MCA service and that in-country connectivity is that it lowers your cost of processing transactions, gives you real-time value, and connects you to the in-country ACH network.
It allows you to do business in the United States just like a local US company, whether you are in Canada or in the US.
Maintaining local accounts in the United Kingdom or the Eurozone
If you are a Canadian or a US based company doing business in the UK or the Euro zone, it’s the exact same thing.
A US based entity who wants to do business in the Euro zone would typically have to set up a legal entity. You would have to operate that legal entity with people on the ground. You would have to have a local office, not a post office box, simply in order to get access to a bank account.
Another hurdle is this: even if you have access to a bank account as a foreign jurisdiction operating in the Euro zone, you typically would not be able to access local connectivity to that bank account.
This is what our solution allows you to do. Even without a local legal entity, possibly a division of your US business, you can have an account domiciled in Frankfurt for euros and pound sterling in London that you can use to send and receive payments—and that is connected to the local payout schemes.
You can do business in both of those jurisdictions—the UK and the Eurozone--just like a local entity even if you don't have full legal standing within those jurisdictions.
You can receive payments without any fees or correspondent charges. You can make payments via that in-country connectivity—payments that are significantly more cost effective than initiating a SWIFT wire from the United States.
Click here to read the previous article in the series.
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