Cross Border Cash Concentrate – AFP Guide

The guide by AFP (American Finance Professionals) outlines the barriers treasurers face when working to concentrate cash across borders.

1. What is cash concentration?

Cash concentration is the practice of moving cash from bank accounts across an organization into one (or more) central account (header account). This increases in complexity when you want to concentrate cash from bank accounts of separate legal entities.

• Establishing the governance structure

To design an effective solution, treasury needs to articulate the key parameters to the various other parties. Banks, for example, have a central role in the execution of the cash concentration structure. Even with companies that operate virtual account networks via their treasury management system, there is always at least one header account that is held with an external bank and acts as the gateway for making and receiving external payments.

• The importance of proper reporting and recordkeeping

Technology plays a key role in managing a cash concentration structure and helps treasurers access accurate and timely information. Also, it helps to demonstrate compliance with tax and regulation (in which case, companies need to record their transactions consistently).

Access to more technology and the impact of regulatory changes means it is increasingly possible to concentrate cash on a cross-border basis. Treasurers who want to do so need to design a solution that is efficient today and flexible enough for the future.