Group treasury management: what are the challenges ahead?
Group treasury management, also known as centralized treasury management, refers to cash management within a company with several subsidiaries. This involves planning and centralizing treasury flows, coordinating financing requirements, and making decisions to maximize the financial efficiency of the group as a whole.
What are the aims of group treasury management?
Implementing group treasury management enables you to efficiently manage the group’s cash and cash flows. This ensures that money is transferred and used efficiently between the different subsidiaries, while respecting the individual needs of each and optimizing the financial benefits for the group as a whole.
The main goals of group treasury management are to:
Optimize the use of cash: available funds can be quickly identified and redistributed to the entities that need them, or invested efficiently.
Reduce your company’s financial costs: with centralized treasury management, you can negotiate better terms with financial institutions due to the greater overall volume, which can result in lower banking costs and more advantageous interest rates.
Improve risk management: by centralizing the management of your financial transactions, you also centralize the management of your foreign exchange products, making it easier to manage the risks associated with fluctuating exchange rates. If you have subsidiaries abroad, you can also exchange currency internally.
Make informed decisions: with an overview of the available resources, investment opportunities or loan requirements may be quickly identified.
Group treasury management may be formalized by means of an agreement.
What is a Treasury Agreement?
The Treasury Agreement establishes a formal framework for the centralized management of the various subsidiaries’ treasury, while maintaining the legal independence of each.
In most cases, the group designates a pivot company (the holding or parent company) to act as intermediary between the various entities. The pivot company is responsible for managing all subsidiary accounts and treasury transactions between them.
It is therefore empowered to analyze the accounts and debit available funds, and then, if necessary, to combine the funds collected into a single intercompany account to facilitate their distribution according to the individual needs of each company within the group.
It is crucial that the Treasury Agreement is meticulously documented and complies with legal requirements in order to minimize risks and optimize the group’s financial and economic benefits. Its wording is governed by the provisions of the French Monetary and Financial Code, and must include a number of mandatory details.
Optimize your group treasury management with Cegid Allmybanks
1. Setting up cash pooling
Implementing cash pooling is essential for intercompany treasury management. The principle of cash pooling is to centralize the cash of the various subsidiaries in a specific bank account, and transfer the funds to accounts with negative balances. Cash surpluses are aggregated to maximize short-term investment opportunities. This strategy increases visibility and control over all cash flows.
The Cegid Allmybanks software enables you to exploit the data resulting from your bank’s automatic cash pooling. On receipt of your statements, the software automatically saves the corresponding transactions in the intercompany accounts of each company (intercompany account holder and counterparty).
You are also able to control and manage your ZBAs and TBAs. Both systems play a key role in optimizing treasury flows. The ZBAs (Zero Balance Accounts) ensure efficient centralization by adjusting account balances to zero each day, while TBAs (Target Balance Accounts) maintain balances at a predefined threshold, facilitating both precise and flexible cash management.
2. Payment centralization
Rather than dispersing payments from different sources, the aim of centralized payments is to consolidate all payments into a single control point for easier management.
Centralizing payments may present challenges, such as the complexity of implementation, the technological requirements for managing transactions and financial data, and the potential security issues associated with centralizing sensitive information. In order to set up a secure and efficient payment factory, it is possible to use treasury management systems and payment solutions
In Cegid Allmybanks, the “Pay on Behalf of” payment enables you to centralize payments from several group entities, and direct them to the bank of your choice to obtain the best processing costs and negotiate financing terms. You benefit from data protection and a high level of security for your transactions.
3. Intercompany financing
The intercompany financing refers to financial transactions between entities in the same group or with the same parent company. These transactions may include loans, cash advances, capital investments, asset disposals or royalty payments.
Group treasury management goes beyond simple intercompany financial transactions. It involves rigorous control of investments, financing and treasury flows. Cegid Allmybanks offers tailored tools to enhance financial visibility and control, essential for the group’s stability and efficiency.