Financing & treasury
Physical cash pooling
Physical cash pooling actually sweeps surplus balances from participating accounts into a master account, and funds deficit accounts from the same source, typically overnight, so cash genuinely changes ownership between entities each day, creating real intercompany loan and deposit positions that each require an arm's length.
Because each sweep creates a genuine intercompany receivable or payable, physical pooling generates more intercompany transactions to track than notional pooling, and groups need robust systems to record daily positions accurately, calculate interest correctly, and reconcile balances at each participant's own borrowing or.
The cash pool leader usually holds the master account and is responsible for managing the daily sweeps, external banking relationships, and any residual surplus or deficit. Whether the leader earns a treasury margin depends on whether it bears genuine liquidity and credit risk beyond simple administrative coordination of the.
In practice
What matters when applying physical cash pooling
- Track each daily sweep as a genuine intercompany position
- Apply each participant's own credit-based rate
- Confirm the leader's role and risk-bearing capacity
- Reconcile balances and interest calculations regularly
- Document the pool agreement and cash flow mechanics
Frequently asked
Common questions
What creates the intercompany position in physical pooling?+
Each daily sweep of surplus or deficit cash between a participant's account and the master account creates a genuine intercompany receivable or payable requiring its own arm's length rate.
Who typically manages the master account?+
The cash pool leader, which coordinates daily sweeps and external banking relationships, and may earn a treasury margin if it genuinely bears liquidity and credit risk beyond simple administration.
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.