Cash pooling for corporate treasury management

What are the benefits of cash pooling for corporate treasury management? Permjit Singh Treasury Consultant finds out

Here is a good overview of the issues and what to do, from Treasury consulting firm, Redbridge Group.

Why bother with cash pooling?

• Reduce bank funding and increase available internal cash resources
• Increase visibility of available internal cash
• Reduce the number of currency conversions and so reduce transaction costs and administration
• Increase operational efficiency across the group and at each subsidiary

And here are a few reasons of my own:

• Encourage employees to think of cash
• Improve cash forecasting and so increase return on investment and/or reduce cost of funding and so increase RoI
• Reduce the number of banks, bank accounts, and so fees and administration.

Knowing which countries and subsidiaries to include in the pooling structure, whether to adopt a hybrid pooling structure (zero balancing and notional pooling), the strengths and weaknesses of banks to be possibly included in the structure, and the legal, tax, accounting, and regulatory requirements of pooling cash cross-border and across legal entities, are major factors that determine the optimum structure used in practice. 

Using the services of a Treasury Consultant who understands the market and keeps up with changes, can be a worthwhile investment not only for the time and cost saved but to ensure the treasury is adopting best practices and so providing the best service to the company and its subsidiaries across the globe.

To discuss improving your Treasury management, contact me for a free, confidential chat without obligation.