Top features to look for in in-house bank software

In-house bank: Centralized cash management, cost efficiency, visibility, and control? 

As things stand, many globally operating companies are burdened by cash management and treasury operations, where each of their subsidiaries or business units manages its own banking relationships and cash management independently. The reasons for this are common, as are the results: Questions like what our consolidated cash position is, what our true foreign exchange exposures are, and even what our overall liquidity risk is are difficult, if not outright impossible, to answer.

As treasurer or a cash manager, you know the risks involved. In the long run, the situation is unsustainable. Something must be done and done right.  As luck would have it, I chanced a word with Nomentia’s top expert about the top features of an in-house bank:

Jouni Kirjola

Jouni Kirjola is the Head of Solutions and Presales at Nomentia, bringing nearly 20 years of expertise to the role. Specializing in payments, cash forecasting, in-house banking, and reconciliation, Jouni has extensive experience and deep knowledge of financial solutions, making him a key leader in delivering tailored solutions that meet clients' needs.  

What is an in-house bank? 

An in-house bank is a centralized financial entity within a corporation that acts as an internal banking unit. It is typically established by large multinational corporations to manage and optimize the company's financial resources more efficiently.

Key features of an in-house bank 

• Centralized treasury operations: The in-house bank merges the cash management, foreign exchange, financing, and risk management functions for all subsidiaries. 
• Internal financing: Subsidiaries can borrow from the in-house bank rather than external financial institutions.  
• Cash pooling: The in-house bank pools cash from all subsidiaries to maximize liquidity and minimize borrowing costs. 
• Foreign exchange management: It facilitates internal foreign exchange transactions between subsidiaries, reducing reliance on external currency exchanges.
• Payment processing: Handles payments for subsidiaries. 
• Compliance and control: Helps monitor and comply with global financial regulations while maintaining internal control over cash flow.

In-house bank software: Can you do without one?

In action, an in-house bank could operate as follows: A multinational corporation with subsidiaries in various countries might use an in-house bank to centralize all financial transactions. For instance, if a European subsidiary needs funding, the in-house bank may lend money from the cash reserves of an Asian subsidiary, avoiding the need for external loans. This set up can bring several benefits, like: 

• Cost savings: Reduces transaction fees and interest expenses by minimizing reliance on external banks.
• Improved liquidity management: Optimizes cash flow by centralizing funds from multiple subsidiaries.
• Better risk management: Provides tools to manage financial risks like currency fluctuations or interest rate changes internally. 
• Operational efficiency: Streamlines financial operations by eliminating redundancies and providing consistent processes.

But there are also challenges like: 

• Regulatory compliance: Operating an in-house bank across different jurisdictions requires adherence to complex regulations. 
• Initial setup complexity: Setting up an in-house bank can involves significant effort and cost.
• Technology dependence: Requires sophisticated financial systems and infrastructure to function effectively. 

It’s up to each organization to discern if the benefits of an in-house bank outweigh the challenges. Let’s compare: 

Core features of in-house bank software: What to look for?

• Integration with global banks and financial Institutions: Automatic integration with multiple bank accounts and financial institutions consolidates real-time cash flow data and provides an accurate and comprehensive view of cash positions across all subsidiaries. “When you require immediate liquidity insights, like funding urgent projects or responding to unexpected cash needs, real-time data ensures accurate decision-making across entities and jurisdictions.” - Jouni Kirjola, Head Solutions and Presales, Nomentia
• Financial system integration: Connecting seamlessly with ERP and other financial systems and platforms centralizes all intercompany transactions like payments, loans, and others, which creates a unified view of global cash flow data. “It’s Ideal for scenarios where centralized financial planning is required, as it provides precise control over liquidity and improves forecasting accuracy in a single consolidated environment.”
• Real-time cash positioning and forecasting: Real-time cash tracking and forecasting provide the treasury team with actionable insights to manage liquidity, plan for cash needs, and optimize cash flow, which is particularly beneficial during periods of volatility or economic downturns, where anticipating cash needs allow the company to avoid expensive external borrowing or missed investment opportunities. 
• Intercompany settlement and reconciliation capabilities: Automated netting of accounts payable and receivable invoices across subsidiaries simplifies intercompany settlements and reduces redundant cash transfers. “These in-house bank capabilities help organizations with high intercompany transactions, as they reduce costs, improve reconciliation accuracy, and streamline cash flow within the company.”
• Automated payment handling: Automating payments and routing through an in-house bank allows subsidiaries to handle disbursements without manual intervention, improving operational efficiency and reducing delays. “This is useful for treasury teams managing high volumes of cross-subsidiary transactions, as the in-house banks allow the treasury to execute payments promptly, meet deadlines, and minimize human errors, and all contribute forecast accuracy.”
• Centralized cash pooling management: Centralized pooling consolidates excess cash from subsidiaries into a central account, reduces reliance on external borrowing, and optimizes interest income. “Centralized cash pooling management is valuable for organizations looking to reduce debt costs, improve investment returns, or leverage internal funds for projects rather than relying on third-party financing.”
• Fraud detection and payment security: Advanced fraud prevention tools, that include approval workflows and role-based security, protect financial data and prevent unauthorized access, reducing operational risk. “These in-house bank features are especially crucial in large organizations with complex approval structures as they enable controlled access and reduce the likelihood of internal and external fraud.”  
• Multi-currency support: Multinational companies handling multiple currencies benefit significantly from automatic conversions that minimize currency risks and unify global cash control and management. "Multi-currency support is ideal for managing international transactions where fluctuating exchange rates can impact cash flows. The multi-currency support of in-house bank software allows treasury teams to maintain consistent cash visibility and avoid currency losses."
• User-friendly interface: An intuitive design of in-house bank software promotes quick adoption across subsidiaries and ensures consistent use and alignment with company-wide financial policies. “In environments with diverse teams, a user-friendly interface reduces training time, encourages standardization of processes, and enhances compliance across regions.”
• Scalability for growth: A scalable in-house banking software accommodates growing transaction volumes, new subsidiaries, and evolving financial structures while supporting the company’s long-term growth. “Scalability is especially beneficial for fast-growing companies, as it allows treasury operations to expand without needing new software, avoiding disruptions and additional costs.” 
• Dedicated customer support: Reliable support ensures that any technical issues regarding the in-house bank software are quickly resolved, which enables smooth implementation and efficient ongoing operations. Dedicated support is especially essential during the implementation phase and when new features are rolled out, as it provides users with expert assistance and reduces downtime for critical operations.  
• Advanced reporting and analytics: Detailed analytics and reporting capabilities of an in-house bank software are critical as they allow treasury teams to monitor global cash flow, track performance, and make data-driven decisions. They grow increasingly useful when developing strategic initiatives or adjusting cash management policies, as they provide insight that helps the company meet financial goals and optimize its cash flow management.

Best Nomentia tools to set up an in-house bank

Cash visibility, cash flow data consolidation and harmonization 

According to Jouni, companies should be asking: “What is our current cash position globally and by subsidiary? Or by currency? Are we accurately reconciling and clearing accounts on a daily basis?”

Centralized cash visibility allows companies to manage liquidity, monitor bank relationships, and analyze cash movements on a global scale. By consolidating data into one view, the treasury can quickly assess cash positions and make informed decisions about liquidity allocation, funding needs, and investment opportunities. 

• Key features: 
  • Unified view of cash management data, including all external and internal cash positions. 
  • Automated daily statement analyses and payment reconciliation for efficient clearing. 
  • Comprehensive dashboards and flexible report structures adapt to different needs, providing group-wide or entity-level insights. 
  • Drill-down capabilities to analyze financial data at any level, from subsidiary to transaction. 

Payment hub for payment process standardization 

“What is the most efficient way to track and control our cash outflows? How do we ensure consistent and compliant payment processes across subsidiaries?” 

A centralized payment hub standardizes payment processes across subsidiaries, reducing manual intervention and enabling more effective cash and working capital management. 

• Key features: 
  • Single platform for all payment processes, including fully automated payments and templates for manual payments when needed. 
  • Real-time payment balances for better cash movement control. 
  • POBO (payment-on-behalf-of); instead of each subsidiary managing its payments through local bank accounts, the in-house bank handles all payments from the in-house bank's centralized account. 

Collection hub for collection-on-behalf-of (COBO) processes 

“How can we decrease banking fees and dependency on multiple bank accounts?” “Can we centralize payment processes to reduce operational costs?” “How do we ensure all subsidiaries have streamlined and efficient payment collection?” 

A collection hub increases efficiency by reducing the need for individual bank accounts per subsidiary, centralizing collections and payments to streamline operations, and reduce bank fees. 

• Key features: 
  • Set up internal accounts for subsidiaries and handle payments on their behalf. 
  • Reduced dependency on banks and banking fees through centralized operations. 
  • Automatic payment reconciliation to improve working capital management. 

Liquidity management to collect all financial data, analyze historical cash flows, and evaluate your working capital 

“Are we positioned to meet our short- and long-term cash needs?”  “How can we ensure that liquidity is optimally allocated across the organization?” 

Understanding liquidity positions across the company enables treasury to manage cash flow efficiently, optimizing both short-term needs and long-term planning. 

• Key features: 
  • Consolidates financial data across ERPs, TMS, and banking systems for an accurate liquidity view. 
  • Customizable dashboards and dynamic data views for monitoring cash positions over time. 
  • Scenario analysis for short- and long-term forecasts and monitoring of FX requirements. 

Cash flow forecasting to control cash and grow 

“What are our projected cash flows for the next month, quarter, and year?” “How do actual cash flows compare with our forecasts?” “What scenarios could impact our liquidity, and how can we plan for them?” 

Accurate forecasting enables the treasury to anticipate cash needs, plan for contingencies, and manage cash flow more effectively, reducing reliance on external funding. 

• Key features: 
  • Automated data collection and projections, with manual adjustments for precise forecasting. 
  • Forecast at various levels (region, division, group) and intervals, enabling both macro and micro-level insights. 
  • Variance analysis to compare actuals vs. forecasts, including seasonal and industry-specific trends. 

Intercompany financing for efficient capital allocation 

“How can we reduce our external borrowing costs?” “Are there opportunities to optimize capital allocation within our subsidiaries?” 

By facilitating intercompany loans, Nomentia allows businesses to allocate capital efficiently within the organization, lowering borrowing costs and optimizing internal resources. 

• Key features:
  • Automated netting, invoicing, and interest calculation for internal debts.
  • Greater transparency over financing activity across subsidiaries to minimize risk. 

Risk management for business continuity 

“How can we proactively manage our liquidity risk?” “What steps can we take to minimize currency risk in our operations?” “Are our treasury practices compliant with global regulations?” 

Robust risk management tools minimize liquidity risk, mitigate FX exposure, and ensure compliance, all of which are essential for financial stability and informed decision-making. 

• Key features: 
  • Liquidity risk analysis and credit risk forecasting based on reliable data. 
  • FX hedging tools, including internal FX hedging, to reduce reliance on external providers. 
  • Sanctions screening for compliance with global regulations. 

Final verdict: Top features to look for in in-house bank software 

In-house bank software has become essential for multinational corporations to streamline global treasury operations, reduce external borrowing, and enhance cash visibility across entities. Key features to look for include integration with multiple bank accounts and ERP systems, providing a unified view of cash positions, and consolidating intercompany payments. Real-time cash positioning and forecasting tools enable proactive liquidity management, while intercompany settlement capabilities automate account netting to minimize costs. Additional must-have features are centralized cash pooling, robust security and fraud prevention, multi-currency support, and a user-friendly interface. These capabilities not only enhance efficiency but also facilitate compliance and support business scalability.

Read more

• The rise of in-house bank: why should group treasurers adopt it?
• 8 benefits of POBO & COBO
• The 6 main benefits of adopting an in-house bank
• When an in-house bank is not an option: Implement netting in China