Intercompany Netting Solutions: What They Are & How They Boost Cash Forecasting

Intercompany netting is essential when managing cash positions feels like playing chess on a board that keeps tilting. You not only need to know the rules but also stay ahead when gravity stops cooperating. By providing a reliable process, intercompany netting in an unpredictable world helps manage multi-entity cash flows with confidence.

When implemented strategically, intercompany netting allows treasury teams to move beyond basic payment management. Elite teams are leveraging proven internal netting strategies that can cut the number and cost of cross-border transactions significantly, and help uncover overlooked ‘cash pockets’ in the process.

This article adapts insights from the two-part FX in Focus podcast featuring Sean Coakley and Jim Kessler, who explore how elite treasury teams are turning corporate netting into a strategic advantage. As they remind us in Parts 1 and 2, cash is the lifeblood of every organization, but circulation is what keeps the heart pumping.

Why Intercompany Netting Matters for Cash Flow & FX Risk

A netting process might well be called the engine that drives global cash flow optimization. Calibrated right, it accelerates liquidity and reduces unnecessary transactions; when overlooked, companies can miss opportunities to free up cash.

How does internal netting optimize cash flow?

As Jim explains, “A lot of companies have a lot of intercompany invoices flowing back and forth. A lot of their cash is deployed for intercompany transactions. Netting brings those payments and activity together.”

This reduces the number of payments that actually need to be made, freeing up cash and improving overall liquidity.

What does intercompany netting look like in practice?

Think of intercompany netting this way: instead of your U.S. headquarters sending five wire transfers to your European subsidiary while that same subsidiary sends three payments back, it calculates the difference and settles with one transaction.

Intercompany netting helps you uncover excess cash balances within specific entities or regions. These funds can then be strategically redeployed to parts of the organization that require additional liquidity, such as for paying down debt or meeting other financial obligations.

Key Benefits of Intercompany Netting

Clear view: Consolidated visibility across global subsidiaries

Lower costs: FX conversion and wire-transfer fees

Find hidden cash: Identify cash trapped in global subsidiaries’ balance sheets

Manage exposure: Track both visible and hidden balances

Smarter cash allocations: Move money to where it’s needed most

Treasury management: Better optimize cash and working capital flows

It's like finding spare change in the couch cushions, only this change can pay down debt or fuel new growth.

The Frequency factor: How intercompany netting can improve cash forecasting

How often should you run corporate netting cycles? The answer depends on transaction volume, but the real question you should ask is this: can you afford not to know?

Most companies find monthly or weekly intercompany netting cycles hit the sweet spot, maximizing cash visibility without overwhelming operations. For high-volume organizations, weekly cycles provide near real-time insight into cash positions. More frequent netting results in better visibility, more accurate forecasting, smarter cash deployment, and improved liquidity management.

Visibility isn’t just power; it could be a game-changer.

Sean shared a striking example. A U.S. manufacturing company with subsidiaries across North America and Europe was running netting cycles only twice a year. When they implemented more frequent cycles, they discovered $15-17 million in cash tied up in settlements that were grossed up more than was necessary.

Beyond Intercompany Transactions: The Bigger Picture

While internal cash flows are the focus of this discussion, it’s only one chapter in the cash management story. Jim makes an important point: to truly optimize cash management, you need to understand how intercompany netting fits within your broader cash flow picture.

Most treasury teams don't just juggle internal transactions; they're also managing inflows and outflows. AP/AR, third-party payments, supplier terms, and incoming revenue all matter.

Adding external payments gives treasury a single, holistic cash view.

Jim notes, “We do see companies that call it 'intercompany' netting, but some companies put some of their external activity into that cycle to help create a holistic picture.”

Combining both data sets gives treasury teams a complete view of all cash movements, internal and external, in a single system. With everything under one roof, it's not just about counting cash; it's about spotting patterns, saving costs, and making smarter moves.

How do you blend intercompany and external cash flows?

Treasury needs both internal and external views to build a holistic cash position and predict where funding will be required.

As Jim puts it, “It's kind of like hitting a moving target. You have your intercompany and you have your external, which you may or may not know about. [The name of the game is] trying to find those two and blend them together to develop an appropriate forecast to help get your cash balances in place.”

Can you expand netting beyond intercompany transactions?

Yes, and some companies do. This next-level approach goes beyond simply consolidating internal flows to find offsets. By strategically incorporating broader cash flows and timing settlements, treasury can optimize liquidity, reduce transaction costs, and make the cash position more predictable.

Bilateral vs. Multilateral Netting: Choosing Your Approach

As your intercompany netting program grows, your treasury team will need to decide how to manage it.

Bilateral netting is the simpler option. It offsets transactions between just two entities. For example, your U.S. parent company and UK subsidiary can settle what they owe each other directly.

Bilateral netting is often easier to implement and works well when your exposures are limited or concentrated between specific pairs of entities, especially if there are unique currency or regulatory considerations.

Multilateral netting, on the other hand, involves three or more entities in one cycle and can suit larger companies. It calculates net positions across all participating companies at once. The result? You can often reduce the number and cost of cross-border payments significantly, since offsetting happens across your entire corporate group, not just between pairs. Multilateral netting is especially useful when exposures are spread across multiple subsidiaries or regions, which allows treasury to consolidate and optimize cash positions more efficiently.

If you’re just getting started, you might begin with bilateral netting to test the process and its impact, to better understand intercompany flows. Once you’re comfortable, move up to multilateral netting to unlock deeper cash optimization and greater operational efficiency.

Learn more about working capital optimization strategies.

Using Netting Data for Forecasting

Once intercompany and external cash are combined, netting data becomes more than a reporting tool; it becomes a forecast engine.

Intercompany netting data can be a powerful tool for predicting the future. By analyzing historical cash patterns, treasury teams gain insights into likely future positions and funding needs, turning past activity into forward-looking guidance.

Historical netting data reveals patterns, which subsidiaries may be generating or consuming cash, seasonal trends, and recurring obligations. As Jim points out, “You can take whatever is in your intercompany netting that's settling now and what's going to happen 9–12 months from now (…) and it will help you with your cash flow forecast in the future.”

Explore more about treasury technology for FX risk management.

How do you improve forecast accuracy over time?

As Jim emphasizes, forecasting is an iterative process. You can't just generate a forecast and take it at face value; ask, how good is it? How reliable? Does it actually work?

Don't fall in love with your first forecast. Start with baseline intercompany data, then layer in external cash flows. Test, measure, identify gaps, and adjust. Historical patterns help you see what works and guide improvements.

Treasury forecasting isn’t about perfection—it’s about getting less wrong with each cycle.

Why Hedging Requires Patience (and a Plan)

Building a forecast is one thing. Sticking with a hedging strategy when the market isn’t moving in your favor, or when your hedge limits your upside? That's another.

Jim warns against the classic trap: “… a lot of companies will hedge one time, have a loss, and say, 'We're done.'” That's not holistic.”

His advice: Assess results over a minimum of 12 months. Sean suggests 36 months for US dollar reporters.

As Jim puts it, “If you're hedging to make money, you're speculating. You're not managing risk.”

The goal isn't winning every trade. It's flattening volatility, so FX stops hijacking your earnings.

Do you feel you could use a refresher on hedging? Take a look at Foreign Exchange Hedging for Businesses Explained.

FX Risk USD Reporters May Miss in Cross-Border Transactions

Many U.S.-based companies assume that reporting in dollars protects them from FX risk, but a strong dollar doesn’t protect everyone; that confidence often hides losses in subsidiaries. Intercompany netting can bring that hidden risk into the light.

USD based companies may think they are safe because on paper, everything looks fine. The parent reports in dollars and assumes the exposure’s covered. But as Sean says, “The parent thinks, ‘I don’t have FX. I’m good.’ But it’s killing their subsidiaries.”

How does netting reveal hidden FX exposure?

By consolidating intercompany transactions, netting shows where currency risk really sits. It highlights which entities need hedging and offsets payables and receivables before settlement, reducing needless conversions.

Discover comprehensive approaches to FX risk management for multinational corporations.

Cash forecast, meet FX risk

Cash forecasts show what you have; FX forecasts can show where the risk is. Intercompany netting lets treasury kill two birds with one stone: tracking cash while keeping an eye on FX risk.

As mentioned before, capturing cash can show your balances; FX exposures can show the risk. Netting lets you manage both in one motion. The same data powering liquidity decisions also surfaces exposures, trimming conversion costs and volatility. One dataset, double the insights.

Why profit and loss figures can’t tell the whole story

Isn’t P&L enough for FX insight? FX revaluations appear on the balance sheet, not as live exposures. That delay can blindside treasury, like discovering a surprise tax payment only after a hedge is booked. Netting turns those static balances into real settlements, showing where cash truly sits and where risk hides.

In short, the P&L might show past performance, but it doesn’t show where cash is moving now. Relying on it for FX forecasting is like checking yesterday’s weather to plan today’s picnic.

Intercompany Netting: The Basis for Treasury Transformation

Once treasury teams can see cash and FX risks clearly, intercompany netting stops being just a tool. It becomes the launchpad for transformation. From here, treasury can evolve toward full-scale visibility and control.

Intercompany netting lays the foundation for smarter treasury operations, making it easier to manage risk, control payments, and optimize liquidity. But it’s just one component in treasury management.

Key tools and strategies include:

Balance sheet hedging: Think of it as building a safety layer around your balance sheet and currency exposures for your reporting.

Cash flow hedging: Lock in today’s rates and keep tomorrow’s surprises at bay.

Payment centers: One hub to rule outgoing payments, cutting duplication and chaos.

In-house banking systems: Your corporate ‘bank,’ which keeps liquidity flowing where it’s needed.

POBO/COBO systems: Coordinate payments and collections like a maestro, without losing track of a beat.

Even with this roadmap, Sean and Jim caution against trying to do it all at once. They’ve seen clients attempt to “boil the ocean,” juggling netting, hedging, and in-house banking simultaneously. As Jim puts it, “… sometimes the right arm doesn't know what the left arm is doing.”

A simple reminder that progress in treasury management is achieved step by step, not all at once.

Step by Step: Start with Intercompany Netting

As the French might put it, it’s time to get back to our sheep (revenir à nos moutons). After exploring cash visibility, FX risk, and the power of real cash data, it’s now time to get practical.

In Jim’s words, “…you have to start somewhere, and a logical place is usually intercompany data.” Starting here gives treasury teams a foundation to understand cash flows, get hands-on with systems, and build the skills needed for more advanced operations.

Jim reminds us, “You might say currency is king. But from a treasury-management / risk management perspective, data is king. And correct data is the ultimate royalty.”

The journey in five clear steps

Step 1: Map your cash structure

Examine how cash moves between entities and get familiar with the systems. Clarity at the start makes everything else easier.

Step 2: Unlock visibility

“… visibility in of itself is a massive value add,” says Sean. Internal netting surfaces hidden cash and creates actionable insights without requiring major upfront investment in new software or systems

Step 3: Discover hidden cash

“… all cash is currency,” Sean reminds us. Even small, overlooked pockets can meaningfully boost liquidity and profitability.

Step 4: Reduce costs

Fewer wires, better rates, less friction. Corporate netting consolidates many small, expensive transactions into one smarter, more cost-effective move.

Step 5: Boost profitability

With visibility, efficiency, and smarter cash management, your treasury practice isn’t just running operations; it’s creating real value.

Once these steps are in place, adding external data allows companies to evolve from a simple internal netting process into a more sophisticated treasury engine, capable of managing cash and FX risk across the enterprise.

Intercompany Netting: The Bottom Line

Remember that tilting chessboard we mentioned? The internal netting process helps you start mastering the board by reducing the complexity of cross-border payments across entities. It does three things well: it reduces transaction volume, reveals where cash is actually sitting, and gives treasury teams the data they need to forecast cashflows with confidence.

The real opportunity? Intercompany netting can evolve from a back-office efficiency practice into a strategic treasury asset. Start with the data you have, implement disciplined processes, and refine iteratively. In Jim's words, “Once you understand it, you measure it, understand where things went wrong, and adjust. It's always adjusting as you go.”

The goal isn't perfection; it's actionable insight. Get these three fundamentals right, and everything else gets easier. Whether partnering with a provider like Corpay or building an in-house tool, better processes uncover hidden cash, surface FX exposures, and turn visibility into control. With treasury yields hovering around 4%, every delay means real money left on the table.

Intercompany Netting Made Simple

Spreadsheets can get you started, but as transactions multiply across currencies, manual cycles become risky and error-prone.

Corpay’s integrated Treasury Management Solutions streamlines intercompany netting, automates settlements, and provides a consolidated view of cash, FX positions, and transaction activity.

Cycles are dealer-managed or dealer-guided, so your team works with Corpay experts to ensure smooth execution. By centralizing payments and optimizing liquidity, treasury can unlock hidden cash and reduce operational costs—without additional software investment.

This article was adapted from the two-part FX In Focus podcast, Intercompany Netting in an Unpredictable World, published May 5-6, 2025.

The opinions expressed on FX in Focus are those of the speakers only, and do not necessarily reflect the views of Corpay Inc.

Cross-Border

Global payments

Risk management