WEBINAR SERIES Cash Management

Transcription

1 WEBINAR SERIES Cash Management

2 CASH MANAGEMENT 2 Contents Definition and tasks Account clearing Cash management in a group of companies Cash pooling Netting

3 CASH MANAGEMENT 3 Centrally defined liquidity... (usually) costs money from a group perspective Land Bank currency Balance by questionary Belgium Banque Lambert EUR Cash Balance Soll-Saldo in EUR EUR Denmark Den Danske DKK Holder Banken DKK France Credit Lyonnais EUR BNP EUR Societe Generale EUR Banque Indosuez EUR UK Barclays GBP Italy Banco S. Paolo EUR BCI EUR Japan Deutsche Bank JPY Deutsche Bank EUR Fuji Bank JPY Netherlands ABN EUR Postbank EUR Austria Creditanstalt EUR RZB EUR Switzerland Postbank CHF UBS CHF UBS EUR Spain Banco Santander EUR Banco Popular EUR Deutsche Bank EUR USA Citibank USD Deutsche Bank USD Bank of Canada CAD Total

4 CASH MANAGEMENT 4 Cash pooling / cash concentration / notional pooling Confusion of terms Physical concentration of payments, real cash pooling, cash concentration Interest compensation, notional pooling, interest charging Value-based balancing of several pool accounts with one master account Optimisation of the net interest result Avoidance of simultaneous credit and overdraft balances Improving the market position

5 CASH MANAGEMENT 5 Cash concentration / zero balancing From the perspective of the bank Overdraft balance of the group Bank balance Credit balance of the group MASTER ACCOUNT Residual balance of MASTER ACCOUNT PA 1 PA 2 PA

6 CASH MANAGEMENT 6 Notional pooling From the perspective of the bank Overdraft balance of the group Bank balance Credit balance of the group MASTER ACCOUNT + 50 (notional) Notional residual balance of MASTER ACCOUNT PA PA PA 3-50

7 CASH MANAGEMENT 7 Use of cash pooling structures Cash pooling is more widely used in Germany than in Austria. This relates in particular to the position as master account holder. Use of cash pooling in % of companies surveyed Germany Master Account Holder - Pool Account Holder No Cash Pooling Austria Source: Schwabe, Ley & Greiner SLG Survey 2010 Germany (Turnover EUR 150m to 10bn.), SLG Survey 2010 Austria (Turnover > EUR 50m.)

8 CASH MANAGEMENT 8 Cash concentration the potential Pooling potential e.g. per currency based on the average balances per account. Total overdraft balances of all subsidiaries overdraft interest p.a. = overdraft balance overdraft interest rate p.a. Total credit balances of all subsidiaries credit interest p.a. credit interest rate p.a. = credit balance

9 CASH MANAGEMENT 9 Framework conditions Voluntary or mandatory pooling Automatic or manual Daily or weekly Pooling account as a liquidity valve Task Subsidiary Head Office Daily clearing Cash pooling Payments Bank accounts Daily clearing of all accounts to zero balance Clearing of surplus liquidity via pooling account Optimal management of payments Regional bank accounts coordinated with head office Daily clearing of all accounts to zero balance Provision of pooling system, target account clearing Optimal management of payments Coordination of all bank accounts, information policy

10 CASH MANAGEMENT 10 Subsidiary accounts Payments Subsidiary Account at Bank A Account at Bank B Account at Bank C Pool account Account clearing Reciepts Payments Subsidiary 7,00% 0,50% 7,00% 0,50% 6,00% 3,00% Account at Bank A Account at Bank B Account at Bank C Balance 0 Balance 0 Balance 1700 Pool account

11 CASH MANAGEMENT 11 Internal perspective Pooling procedure Automatic transfer Mirror-image charging Internal reporting requirements Forderungen an Holding Verr. Kto. Holding (Abb. in Buchhaltung) 1700 Pool-Konto Gruppengesellschaft Konto Bank A Konto Bank B Konto Bank C Saldo 0 Saldo 0 Saldo 0 Automatischer Pooling-Übertrag Pool-Konto Konto Bank C 1700 Saldo 1700 Gruppengesellschaft Verbindlichkeit ggü GG (Abb. in Buchhaltung) Pool-Konto Verr. Kto. GG 1700

12 CASH MANAGEMENT 12 Calculation of cash pooling potential Starting point 4 group subsidiaries with high overdraft balances 2 group subsidiaries with (simultaneous) credit balances No cash pooling system in place What would be the potential of introducing cash pooling? Cash pooling potenztal Overdraft interest Overdraft interest p.a. Interest rate p.a. Ø overdraft balance p.a. Credit interest Credit interest p.a. p. a. Interest rate p.a. Company A 36, , % 2,945, % Company B 7,950 31, % 578, % Company C 3,820 15, % 244, % Company D 734 2, % 46, % Ø credit balance p.a. Company E 7.25% 3,990 15, % 1,064,000 Company F 7.00% 9,350 37, % 2,992,000 Total 49, , % 3,815,238 13,340 53, % 4,056,000 Cash pooling potential (avoidance of overdraft interest): 3,815,238 x (5.17% %) = 147,103

13 CASH MANAGEMENT 13 Definition of the rules Cash Pooling Guideline Besides the cash pooling agreement between the bank and the master account holder, there also needs to be an internal agreement between the master account holder and the participating subsidiaries in which at least the following aspects are defined. 1. Banks and accounts encompassed 2. Management and organisation (who is the master account holder and which subsidiaries are included?) 3. Interest charging (reference interest rate, margin and interest charging interval) 4. Overall line (limit) for the pool in accordance with the development of the liquidity of the pool account holders 5. Internal lines (limits) in line with working capital requirements 6. Account clearing forecast and cash flow forecasting 7. Costs of the cash pooling 8. Taxation and liability-related issues 9. Technical implementation (interface EB TMS, automatic booking of intercompany financial clearing accounts, automatic computation of the interest) 10.Formal requirements Starting date and duration Termination Applicable law