Liquidity structures
Cash pooling, and the arithmetic underneath every sweep.
Sweeps at cut-off, target balances, notional sets where nothing moves at all. Each participant’s position with the header account, the interest it is owed for the days its cash sat there, and both legs of every movement booked where your controller will look for them.
Header account position
EUR 56,315,000
Every participant’s position with it, added up.
- Spain, operations ES-01
- EUR +32,410,000
- Spain, hotels ES-04
- EUR +18,265,000
- Portugal PT-02
- EUR +9,820,000
- Netherlands, services NL-01
- EUR -4,180,000
Accounts in this structure5
4 participants and the header account they settle against.
Physical and notional
What actually moves at cut-off, and what stays where it is?
Two structures, side by side. In one, cash leaves the participants’ accounts and lands in a header account. In the other, nothing leaves anything: the bank reads four balances as one and prices that. A group usually runs both, at different banks and in different currencies.
Structure one · physical
EURCash sweeps to a header account
Each participant is swept to zero, or to a balance it keeps. What leaves becomes a position against the header, and that position is what the header is holding.
- Spain, operationsES-01
Position with headerEUR +32,410,000
Sweeps to the headerEUR 4,860,000
Zero balance at cut-off
- Spain, hotelsES-04
Position with headerEUR +18,265,000
Sweeps to the headerEUR 2,140,000
Zero balance at cut-off
- PortugalPT-02
Position with headerEUR +9,820,000
Sweeps to the headerEUR 915,000
Target balance keptEUR 250,000
- Netherlands, servicesNL-01
Position with headerEUR -4,180,000
Funded from the headerEUR 620,000
Target balance keptEUR 500,000
Header account
EUR 56,315,000
The 4 positions above, added up. Nothing else is in this account, which is what lets the two be checked against each other every day.
Structure two · notional
USDBalances are netted where they are
No sweep, no transfer, no position between the participants. The bank sets interest on the four balances read as one, and each account keeps the money it holds.
- United States, hotelsUS-02
BalanceUSD 12,940,000
Stays in this account
- United States, servicesUS-05
BalanceUSD 3,615,000
Stays in this account
- Dominican RepublicDO-01
BalanceUSD -4,280,000
Stays in this account
- MexicoMX-03
BalanceUSD 1,860,000
Stays in this account
What the bank pricesUSD 14,135,000
The four balances read as one. The overdrawn account is covered by the other three without a cent leaving any of them.
In neither structure
38 of the group’s 47 bank accounts are in no pooling structure at all. They are read into the group position like every other account, and nothing is ever swept out of them. Two of them, and why each one is out:
- Cuba CU-01
- The account is in no pooling structure, so nothing is ever swept out of it. Its balance is read into the group position from where it sits.
- Spain, pledged account ES-09
- Pledged against a facility, so the balance is not available to sweep. It is held, reported and reconciled like any other account.
What it reads
What does it read to run a structure like that?
The same files and the same ledger every other module reads. A pool is a configuration on top of them, not a second system keeping balances of its own.
- The balance each account really closed at
- MT940, CAMT.053, Norma 43, BAI2 — whatever each bank sends, in the shape it already sends it. A sweep computed from a balance nobody reconciled is a transfer somebody has to unwind.
- The structure itself, as configuration
- Which accounts participate, which one is the header, what each participant keeps, and the rate applied to each side. Changing a participant is an edit rather than a project.
- Everything already promised to leave
- Payments approved and queued against a participant’s account before cut-off, so a sweep is computed on what is actually free instead of on a balance that is already spent.
Your instruction, your accounts
After the sweep
Can you still prove any of it a month later?
A pool is easy to run and hard to explain. The month it has to be explained is the month somebody asks why one company’s cash is sitting in another company’s account, and the answer has to be a record rather than a recollection.
The shape of this group’s pooling
- Structures
- 2
- Euro pool participants
- 4
- Accounts in a structure
- 9
- Accounts in neither
- 38
- Both legs of every movement
- A sweep is one movement and two entries: what left the participant and what arrived at the header, matched to each other and to the statement lines both banks report. Neither leg can exist on its own.
- The position at any level
- Participant, structure, entity, group. Open a level and what is underneath it is the level above, taken apart — so the entity’s intercompany balance and the group’s header position are one record read twice.
- Interest with its inputs attached
- Each allocation keeps the average position it was computed on, the rate that applied and the day count it was quoted against, so the figure can be reproduced from the records instead of trusted.
- What the pool left where it was
- Accounts outside a structure stay outside it and say so on the surface. A group position that quietly folded them in would be a true figure under a false label.
So the intercompany balance the controller books, the header position treasury funds the day from and the interest the CFO is asked about come off one set of records, and the trail behind each of them exports.
What the structure costs
Who is owed the interest, and how much?
A pool moves cash between companies that keep their own books, so somebody is lending and somebody is borrowing, and both of them have to be paid or charged for it. Here is a month of that, participant by participant.
- The rate basis is yours
- One rate for a participant in credit, another for a participant the header is funding, held per structure and per currency. Change either and every line is recomputed from the same positions.
- Computed on the position, day by day
- Each participant’s average position over the period, at the rate for the side it was on, over the day count that rate is quoted against. The lines add to the net because the net is the lines.
Where this stops
Net interest for the period
EUR 126,686.23
Over 4 participants · 31 days · actual/360
- Spain, operationsAverage position EUR +29,880,000
- EUR +73,330.50
- Spain, hotelsAverage position EUR +17,240,000
- EUR +42,309.83
- PortugalAverage position EUR +9,365,000
- EUR +22,983.27
- Netherlands, servicesAverage position EUR -3,905,000
- EUR -11,937.37
Credit rate · per year2.85%
Debit rate · per year3.55%
Day to day
Who runs the pool, and when do they open it?
Three people, three moments, one structure — and none of them is waiting on a spreadsheet from the other two.
- Treasury, at cut-off
- Sees what each participant is about to sweep, what the header will hold afterward, and which account needs funding before its own bank closes.
- The controller, at the close
- Books both legs of every movement and the month’s interest against the same positions treasury has been funding from, so nobody spends the following week agreeing on which company owes which.
- The CFO, when the facility is priced
- Takes what the structure actually cost the group last month, with the rate, the day count and the positions behind it still attached to the figure.
What it works with
Before you ask
The questions a pool actually raises.
- 01Physical or notional — which one does it run?
- Both, and usually at once. A physical structure sweeps cash to a header account and leaves each participant with a position against it; a notional set moves nothing and nets the balances for interest. Each structure is configured on its own, with its own participants and its own rate basis, and the two are never added into one figure.
- 02Do sweeps happen without us approving them?
- No. A sweep is money moving between your own accounts, on your instruction, through the approval path your policy sets — the same path a payment takes. Nothing reaches a bank without the approvals you require, and until it has them a sweep is a proposal on a screen with the amount and the accounts already on it.
- 03What happens to accounts that are in no structure?
- They are read and reconciled exactly like the pooled ones, and nothing is swept out of them. The count of accounts outside every structure sits on the surface beside the pooled figures, so a group position never quietly becomes a position over whichever part happened to be pooled.
- 04Can a participant see its own side of it?
- Yes. Every participant opens its own position with the header, the movements behind it and the interest allocated to it for the period, cut to the entity the person is answering for. It is the same record the group reads, not a report somebody assembled for them.
- 05How is the interest allocated between participants?
- From each participant’s average position over the period, at the rate set for the side it was on, over the day count that rate is quoted against. Every line keeps those three inputs, and the net is the sum of the lines rather than a figure computed beside them. What the allocation means for each company’s books is for your accountants to decide, and the working is exported for them.
See your own structure, priced.
Bring the accounts you already pool and one month of their statements. We will show you the same structure with your own balances in it — including the accounts that are in no structure at all, which is usually the part worth looking at.
A first look runs from files alone, and nothing has to change at your banks to do it.