“Multilateral Netting System”
A Multilateral Netting System is a method of managing corporate treasury that involves offsetting payables against receivables between group subsidiaries, reducing cash in transit and providing diverse advantages for treasury managers.
Under multilateral netting, subsidiaries send their payments to a netting centre responsible for distributing cash to pay company and subsidiary debts and purchases.
Advantages of multilateral netting
- Centralising processes increases cash management efficiency and improves control over internal payments
- The treasurer gains a more accurate view of company liquidity, and cash spends less time in banks
- Reduced foreign exchange risk
- Reduced use of bank accounts and therefore bank fees
- Reduced cash in transit between subsidiaries