Cash pooling is a system by which a company or group of companies concentrates or centralizes their balances in order to obtain a global net position, either in a current account or in consumer credit. The rule of thumb is: the fewer banks operate and the fewer accounts there are, the better.

What are the different types of cash pooling?

There are two main types of cash pooling arrangements: notional cash pooling and physical cash pooling. A notional cash pool allows the multinational group to net off the balances of various bank accounts across jurisdictions. The cash is not physically transferred to a cash pool leader’s bank account.

Is cash pooling a loan?

The nature of the mechanism is similar to the intragroup loans. Cash pooling allows companies to combine their credit and debit positions in various accounts into one account.