Cash pooling

Also known as: Pooling of liquidity

Cash pooling is a group-internal liquidity equalization through a central financial management. It balances out liquidity cover with loans or withdraws excess liquidity from the group.

Definition / explanation

The term cash pooling, also known as liquidity pooling, translates as pooling liquidity. This is understood to mean an internal balancing of the liquidity of a group with the help of a central financial management system, usually developed by the parent company.

Dabei stehen der Liquidätsbedarf und der Liquidätsbestand einzelner Einheiten im Konzern konträr zueinander. Cash-Pooling sorgt für den Ausgleich zwischen Mutter- und Tochtergesellschaften, in dem die Tochtergesellschaften Geldmittel an die Muttergesellschaft für ein gemeinsames Cash management weiterleiten. Dafür wurde das Cash-Pooling-System eingeführt. Es handelt sich um ein zentrales Bankkonto aller beteiligten Gesellschaften. Haben Gesellschaften einen Liquidätsbedarf, können sie aus diesem Pool Geldmittel zu günstigen Bedingungen erhalten. Gesellschaften mit einem Liquidätsbestand können ihre Geldmittel auf diesem Bankkonto anlegen.

Goals of cash pooling

  • achieve better conditions with larger investment volumes
  • Interest optimization
  • Reduction of the credit volume within the entire group
  • Reduce borrowing and thus lower costs

Real (physical) cash pooling

Physical cash pooling or cash concentration is the actual transfer of funds between the subsidiaries and the master account. This optimizes interest rates.

Fake (virtual) cash pooling

With virtual cash pooling, also called notional pooling, the interest rate optimization is not achieved with a liquidity transfer, but with a fictitious offsetting of the value date balances of all secondary accounts.

These balances are only offset and the interest is offset against the main account. In addition, different currencies can be linked without actually flowing funds and thus avoiding the risk of a currency transaction.

The fake cash pooling serves as the basis for determining debit and credit interest rates.

advantages

  • Protection of bank loans
  • Reduzierung von Fremdkapital durch eine optimale Allocation von internen liquiden Mitteln
  • Optimization of interest rates with the help of in-house investments / loan provision
  • Interest optimization with a central credit management
  • central overview of the Group's liquidity

Risks

  • a lack of control leads to a cluster risk
  • complex control and monitoring necessary
  • Subsidiaries lose their economic independence
  • increased risk of abstract bankruptcies

Summary

  • Group-internal liquidity balancing through central financial management
  • Liquidity levels and liquidity requirements are contrary to each other
  • Real cash pooling refers to the actual transfer of funds between the master account and the subsidiaries
  • fake cash pooling forms the basis of the debit and credit interest rates and a fictitious offsetting is carried out
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