Operations & compliance
Intercompany netting
Intercompany netting is a treasury process where a group offsets multiple intercompany payables and receivables across entities into a single net settlement per entity per period, rather than settling every individual invoice separately, which significantly reduces the number of cross-border payments and the associated FX.
Running a netting centre typically involves each entity submitting its intercompany balances by a set cutoff date, the centre calculating net positions across the whole group, and a single settlement instruction issued to each entity, which also gives treasury much clearer visibility over group-wide intercompany cash flow.
Netting is a cash management tool rather than a transfer pricing mechanism, so it does not change the underlying pricing of any transaction, but the reconciliation data it relies on must still tie back accurately to the individual invoices and agreements that transfer pricing documentation describes. This matters in practice.
In practice
What matters when applying intercompany netting
- Set a clear monthly netting cutoff date
- Reconcile balances before netting, not after
- Keep netting separate from pricing decisions
- Maintain visibility of gross transaction detail
- Coordinate netting centre with tax on FX gains
Frequently asked
Common questions
Does netting change transfer pricing?+
No, netting only affects how balances are settled in cash terms, it does not alter the underlying arm's length pricing of the individual transactions being netted. This matters in practice.
What does a netting centre actually do?+
It collects each entity's intercompany balances by a cutoff date, calculates net positions across the group, and issues a single settlement instruction per entity. This matters in practice.
See how the tooling handles this in practice
Our transfer pricing tools calculate intercompany charges, benchmark financing and reconcile the intercompany ledger from your own data. Book a short walkthrough and we will show the workflow on a scenario that matches your group structure, rather than a generic demo dataset.