Real and virtual accounts

ClearBank | August 2023

Real accounts vs virtual accounts: how to choose the best option for your business

When examining the bank account options for your business, you may have come across the phrases ‘virtual accounts’ and ‘real accounts’. It can be confusing and likely prompted an obvious question – what's the difference, and which type will work best for my business?

Put simply, a real account ​holds​ ​​money. A virtual account, on the other hand, is a ledger to see the transactions​ against​ a real account.

In this post, I’ll outline the critical defining features of real and virtual accounts, their differences and how they work together. I’ll also examine the benefits of each and whether an all real accounts structure or a structure with both real and virtual accounts is best for your business.

What is a real account?

As the name suggests, a real account is an actual account that ​​holds money. Real accounts have balances that are credited or debited. This type of account ​structure ​will have its own account number and sort code.

One type of real account structure is to have one real account for multiple customers. For example, a credit union using this account structure could include all its members on one account. The members’ money would be co-mingled, which means the credit union must manually track incomings and outgoings, draw and manage balances for each member.

Another kind of real account structure is to have several designated real accounts. For instance, a small wealth management firm with 10 customers might have a designated account for each. Because each customer has their own account number and sort code, the firm doesn’t have to track balances manually.

Real accounts make sense in these examples because the credit union and wealth management firm have a ​manageable​ number of customers. But what about financial institutions that manage money for ​tens of ​thousands or even millions of customers? That’s where virtual accounts come in.

Head to the ClearBank website to read the full guide.