Intercompany netting unifies subsidiaries in a corporate group, allowing them to net and convert all intercompany transactions to a single transaction in their home currency. This net amount is paid to or received from a central netting center, reducing credit and settlement risks.
Reduce Payment & FX Costs
With intercompany netting, you can convert each entity’s transactions into a single local currency amount to reduce payment and FX costs and bring structure and discipline to intercompany finances.
Typical Intercompany Finance Issues
- Small, costly FX deals
- High bank fees
- Multiple, differing payment deadlines in a month
- Limited visibility over all payments
- Difficult to hedge
- Requires more reconciliation work, reminders, and administration
- Misaligned intercompany bookings
- Discrepancies with Intercompany Reconcilliation (such as wrong P/L or balance sheets)
The Benefits of Running Intercompany Netting
Quantifiable Benefits
With intercompany netting, organizations save time and money by making fewer payments and getting full visibility into every procedure and transaction. FX is centralised and netted off, and the remaining FX is aggregated to larger volumes at better rates.
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Find Efficiency in Simplicity
Subsidiaries are able to report what they will pay or would like to receive and transactions are settled in a central, secure hub (the netting center). This eliminates bilateral payments for most entities, and nets all transactions over the month into one payment per subsidiary in their local currency. Settlement can be either physical to bank, or cashless to IHB, or both.
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