Cash Pooling

What is cash pooling?

Cash pooling is a treasury technique that consolidates cash balances across multiple bank accounts or subsidiaries into a single structure, giving the group full cash visibility of its aggregate position and reducing the need to borrow externally when cash exists elsewhere in the organisation.

Types of cash pooling

Physical cash pooling (zero balancing): Cash is physically swept from subsidiary accounts into a central header account at end of day. Subsidiary accounts return to zero.

Notional cash pooling: Balances remain in individual accounts but are notionally offset. Interest is calculated on the net group position. No physical movement of cash.

Multi-currency pooling: Extends cash pooling across different currencies, consolidating EUR, GBP, USD etc. into a base currency position.

Why cash pooling matters

Reduces external borrowing: the group uses internal cash instead of credit facilities
Minimises idle cash: surplus funds concentrated and invested centrally
Simplifies treasury operations: one cash manager sees and acts on the full group position