A multilateral netting system is a settlement mechanism used by companies to pay for goods and services purchased from affiliated companies. The netting process consolidates intercompany transactions and calculates settlement requirements internally instead of using external payment systems. Multilateral netting systems are typically used by companies with a number of affiliates in different countries. By netting, they reduce bank fees, currency conversion costs, bank balances and improve operating efficiency. Reducing the number of cross border flows saves bank charges and reduces the number of foreign exchange transactions and the spread lost to intermediaries.