Is Cash Pooling Reserved to Large Groups?

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Cash pooling is a management method centralizing all the bank accounts owned by a group’s companies. It aims to optimize the needs and excesses in treasury. There are numerous advantages. The liquidity risk is lowered as well as the transactions fees and overdrafts can easily be avoided. Companies also have a clearer treasury understanding and have access to a larger financial products choice. Is cash pooling solely reserved to large groups or is it a cash management system SMEs could easily benefit from? To set up cash pooling, each companies of the group have to sign a convention defining the key elements such as the consolidation modalities and the interest repartition applied. This convention has to take into account the laws of each state in which the subsidiaries are located. As POLÀK (2007)1 explained it, in countries where the concept of cash pooling does not exist, like in Czech Republic, it can be quite complicated to deal with the local legal regulations and associates the local companies into the global cash pooling. Furthermore, cash pooling implies the opening of group current accounts in the name of each subsidiary in the accounting books of the central treasury. In addition to these legal requirements, the cash pooling setup requires a deep and complete analyse of the company’s cash structure not only to make the good strategic choices but also to be convincing when negotiating with the banks. You have to develop a flawless communication system between each stakeholder to be sure there is no loss of information and be able to store the data for reporting and legal auditing purposes. The employees also have to be involved and trained to understand and be able to deal with the cash pooling system. Cash pooling has many benefits but its setup implies high implementation costs. SMEs are generally less

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