Ten steps towards setting up a successful cash pool - Round Table Report

Cash pooling offers clear advantages to businesses that want to make cash ‘trapped’ in subsidiaries available at the group level. ​

Lower banking costs, reduced need for finance and better risk management are just some of them. However, setting up a pool takes time, money and resources, so planning for success is essential.
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The eight corporate treasurers who joined The Working Capital Forum and our sponsor Coupa for our virtual round table were all at different stages of their journey to pooling; one had already set up a pool as part of extensive restructuring of the treasury and liquidity function. Another had established inter-company netting and was leveraged that experience to move forward to a cash pool.

From a wide-ranging conversation over a ‘virtual’ lunch, some clear pointers emerged for anyone starting down this path in their own business:

1. Talk to advisors: While two treasurers with live RFPs had not worked with an external company to prepare them, all agreed that advice on issues such as transfer pricing, tax and other legal and regulatory issues was essential.
2. Gain visibility into cash within the group: Before considering pooling, you’ll need a granular understanding of where your cash is and how it’s being managed at the local and regional levels. Only then can you see what might be achieved by centralising that cash.
3. Rationalise bank accounts: Pooling can cover multiple entities, but it’s easier if you can reduce the number of bank accounts in your group.  A bank account rationalisation programme is a great precursor to pooling. The more of your accounts are with one bank, at least at the regional level, the smoother the setup is likely to be. 
4. Don’t forget the human factor: Pooling isn’t just about technology and financial instruments – several group members reported that management at the country level was often reluctant to surrender control of what they saw as ‘their’ cash. Setting up an intercompany netting arrangement can be an excellent way to build trust before taking the step to pooling.
5. Clean your data and check your reporting standards: Having common data standards across your group is essential. For example, one treasurer found some serious misreporting, which could have derailed any pooling effort if left uncorrected.
6. Standardise ERPs where possible: It isn’t essential to have all your group companies on a standard ERP, but it certainly makes pooling easier. Can you reduce the number of different systems in use? 
7. Good project management isn’t optional: Treasurers who have concentrated on project management – sometimes using specialist consultants – have seen the benefits as projects are less likely to slip behind, saving time and money.
8. Budget carefully: The cost of setting up a pool will vary depending on the complexity. For example, one treasurer at a complex multinational reckoned one 2-3 year period before the pool reached ‘break even’ on the setup costs – after that, there was a net saving through fewer FTEs and lower all-round costs.
9. Don’t assume your bank has to lead: Some treasurers work closely with their primary banking partner to establish their pool, but modern technology means much of the heavy lifting can be done within a TMS or other non-bank platform.  
10. Learn from the experiences of others: Our group was unanimous in the view that talking to those who had ‘been there and done that’ in groups such as The Working Capital Forum gave them the best possible start.

​This lunch, sponsored by Coupa, was the latest in a series of virtual roundtable lunches organised by The Working Capital Forum, which returns to live events on 14th October with The Working Capital Forum London.