Internal Accounts

As an "in-house bank", the central finance department offers your affiliated companies financing and investment options, hedging (e.g. letters of comfort or interest rate hedges) and, if necessary, exchange options for foreign currencies in the form of internal foreign exchange transactions. It manages the master accounts of cash pools and e.g. offsets intra-group receivables and liabilities multilaterally within the framework of netting.

Cash flows are generated on the basis of all these activities, which can be mapped to accounts in the treasury management system the same way as in a bank. In contrast to "external" bank accounts, these accounts are called "internal accounts", clearing accounts, money transfer accounts or intercompany accounts (ICA). Like a current account, internal accounts should be able to bear fixed or variable interest and be settled according to various methods. Information for the account holder is provided by viewing it directly in the treasury system or via reports or electronic statements, just as with "external" bank accounts.

Trinity TMS Functions at a Glance

Creation of intercompany accounts for different purposes
Information on turnover and account balances for the parties involved at all times
Central overview/current status of all activities
Support of different interest and settlement methods
Determination and posting of interest accruals and deferrals
Automated accounting and posting can be achieved via the generation of

- booking instructions and/or
- electronic bank statements (e.g. MT940)

Benefits

Time and cost savings

Liberation of valuable resources through automation of routine processes
Lower transaction costs due to elimination of external bank accounts
Quick access to information and current status

Risk reduction

Limitation of the foreign exchange risk through possible waiver of accounts abroad
Error prevention through system-internal automated processes

Process optimisation

Processes can be automated from interest calculation to booking
Simplified process through specification of the counterparties
Process acceleration through internal approvals

Maximum transparency and auditability

Traceable processing at all times
Possibility of observing internal lines and limits
Flexible search options
Different views and specific evaluations for all stakeholders

Best Practice

Most companies today use internal accounts instead of expensive bank accounts wherever possible. If intercompany financing is not to be granted as a credit agreement with a repayment schedule, but in the form of overdraft facilities or via cash pool lines, the interest-bearing internal accounts are very well suited.

More favourable (but in any case in line with the market) conditions offered to affiliates via the in-house bank bring advantages for all parties involved and promote the acceptance of a globally deployed treasury management system. By pooling global financing or investment needs, the central treasury department achieves economies of scale with its few principal banks, which it can pass on to the subsidiaries (taking into account local comparative offers and, if applicable, internally assigned ratings).

The affiliated companies can make direct use of the central offerings within predefined limits without tedious research and comparison of quotations, thus saving time and costs. Financial managers can find out about the current status of account activities via the Internet at any time. For clarification of ambiguities, dedicated contact persons can provide information and support. Everything is done in the interest of the company as a whole and is therefore not subject to external influences.

Depending on individual requirements, all cash flows from all possible transactions can be mapped on one intercompany account or on various internal accounts. In any case, it is guaranteed that the account holders can only view their accounts and not those of third parties.

Blogs

Intercompany Clearing or Netting?

Case Study

TMD Friction