Subsidiaries of multinational corporations typically interact with each other commercially. If the subsidiaries' home currencies differ from each other, the multilateral business can result in a complex invoice ledger, carrying a significant currency risk.
The most effective way to cut payment costs is not to make the payments in the first place. That is what Netting does, it eliminates most intra-group payments across the external banking system. In addition, the use of netting will often lead to improvements in other areas as the netting system imposes operational discipline throughout the group.
Netting also reduces cash-in-transit and centralizes the management of currency dealing to the head office, making it an essential tool for increasing the efficiency in money logistics.
Participants report their receivables to ensure that the invoices are paid on due date. Alternatively, payables are reported to allow the payer to manage what is included in netting.
Use different netting rules for different business units based on local requirements. Full netting results in a single home-currency transaction per unit. The Advanced Netting options allow sophisticated currency specific rules.
Set up the start, submit, closing and settlement dates flexibly, select the units to be included in each cycle, and use overlapping cycles if necessary.
Include third parties in your payable driven netting, e.g. vendors.
Import receivables or payables directly to netting to avoid manual keying. Export the netted invoices for ERP reconciliation and create payment files.