INVE is a family holding company with more than 30 enterprises worldwide. It produces starter feeds, pre-mixes and additives in aquaculture and agriculture.  Customers are supplied in 75 countries.

Account management
Companies trading in different parts of the world are inevitably confronted with the management of bank accounts in different countries: monitoring international payments and account balances, issuing instructions for payments and transfers between different accounts, transfer costs...

Central management
"When I started at INVE, the situation arose that one firm was borrowing at a local bank whilst another firm in a different country had generated cash and was investing it in a term account.  This is not the best way to use the existing cash.  It came about through excessive decentralisation of the cash management function."

"By implementing 'notional pooling', I now try to manage all the European accounts of our group as though they were a single account.  We ask our foreign subsidiaries to open an account at a Fortis branch in their country.  Whilst they can continue to conduct their business locally with their local bankers, we ask them to transfer their excess cash once or twice a week to their Fortis account. If they need cash - on account of large payments to suppliers, for example - we ask them also to transfer the deficit to their Fortis account."

"The aim is to keep as little cash as possible at the local banks and to centralise all cash in the Fortis accounts.  We then manage the consolidated total of all these Fortis accounts from the Treasury Centre and borrow or invest in the market in the name of the Treasury Centre."

Notional Pooling
Notional Pooling consists of a virtual set-off of the debit against the credit balances of the various accounts participating in the 'pool', in order to reduce the interest paid on the debit balances and to increase the interest received on the credit balances.
Firms using this technique benefit from the reduction in loans within the group and the associated management costs, as well as from the reduction in transfers. The autonomy to manage each account is maintained, since the balances are retained on different accounts.

"For the interest calculation, the bank is now looking at the overall position of the company rather than at the position of each subsidiary separately. It is possible here to work with accounts in US dollars, pounds sterling and euros...

Netting
Netting is a technique for organising and simplifying the settlement of inter-company payments, whereby supplier and customer accounts are periodically settled via our own netting centre.
"Inter-company netting is also used at INVE.  This technique is advantageous when there are a lot of money movements within your own group. It reduces the number of transfers, brings down the cross-border fees and optimises the float (value days)."

"If a firm in Europe carries out research for a firm in America, it is possible that it sends three invoices in one month for this, whilst this firm in America must also receive about six amounts from other INVE subsidiaries worldwide during the same month.  Instead of sending money abroad three times and receiving money from foreign countries six times, with all the costs that this entails, the INVE Netting Centre calculates the difference once a month between the invoices payable and the invoices receivable for each subsidiary.  In so doing, the total payments are reduced to a single transaction, namely the payment or receipt of the balance calculated via netting."

The investment in software to implement a multilateral netting system is relatively high, but in the future we are talking here of significant savings in costs and administration.  In a favourable scenario, firms may possibly be included in the netting which do not belong to the group, but deliver to different INVE subsidiaries.  They too will then benefit from the advantages of the netting system."

There are a number of administrative benefits associated with this netting.  To start with, netting creates a standard procedure for inter-company payments.  Furthermore, the netting system allows better management and control of the inter-company payments, which leads to refined financial planning for the firm.  But it is especially the simplification of the administration involved in multilateral payments which allows the biggest savings.