Making Intercompany Netting Stick
Intercompany netting programs often fail because companies struggle with calendar misalignment and uncontrolled factory settlements. This article presents practical strategies to address these common obstacles, drawing on insights from treasury and finance professionals who have successfully implemented netting solutions. Learn how to establish the operational discipline needed to maintain an effective netting program that delivers consistent cash flow benefits.
Harmonize Calendars and Restrict Factory Settlements
One move that made our intercompany netting center of excellence stick was calendar harmonization across entities, paired with a hard rule that only netted positions flowed through the payment factory. Before that, local teams kept operating on their own close and settlement cycles, which diluted the benefit. Once everyone aligned to a single netting calendar, balances stopped sitting idle and working capital freed up almost immediately.
We measured impact very pragmatically: FX settlement volumes dropped noticeably within the first two cycles, and banking fees fell because we reduced the number of cross-border payments rather than just their size. What made it work wasn't sophistication it was consistency. The moment netting became the default, not an exception, the financial benefits showed up fast and stayed visible.
Standardize Intercompany Terms and Invoice Data
Standardize intercompany terms and invoice formats to remove friction from netting. Use common payment terms, currency codes, tax fields, and entity identifiers across all companies. Align cut-off dates and due dates so invoices mature into the same netting cycle. Adopt a single invoice template with required data fields to improve matching quality.
Keep a controlled master data dictionary so new entities can plug in fast. Review local legal needs and bake them into the standard to avoid later rework. Start a global design workshop and lock down the standard within a fixed timeline.
Enforce Global Treasury Policy and Controls
Make intercompany netting mandatory through a clear global treasury policy. The policy should define scope, eligibility, netting cycles, and settlement methods. It should state when exceptions are allowed and who approves them. Link the policy to internal controls and audit requirements so adherence is measurable.
Tie compliance to cash and working capital KPIs tracked by leadership. Publish the policy and train all entities so there is no confusion. Begin by drafting the policy, approving it at the CFO level, and setting an immediate go-live date.
Automate ERP Match Rules and Single Payments
Automate matching and netting inside the core ERP so the process runs the same way every time. Enable automatic matching rules that clear clean items and route only exceptions for review. Schedule monthly or weekly netting cycles that create net payables and receivables with proper postings. Integrate bank connectivity to issue a single settlement per currency and capture confirmations.
Maintain full audit trails so finance and audit can trace each step. Reduce manual files and emails that introduce delays and errors. Kick off an ERP enablement project and configure netting in the next release window.
Incentivize Compliance and Apply Internal Charges
Reinforce compliance with a fair mix of chargebacks and credits that affect local P&L. Apply a small internal funding charge when teams bypass netting and create extra bank fees or FX costs. Offer credits or lower allocations to entities that meet cycle cutoffs and data quality targets. Publish performance dashboards so leaders see who helps or hurts group cash flow.
Keep rules simple, transparent, and approved by governance to avoid disputes. Review the incentives quarterly and adjust for real cost changes. Draft the incentive framework now and communicate the effective date and examples.
Empower Central Coordinator and Clear Escalations
Appoint a central netting coordinator with clear authority to run the calendar and resolve disputes. Give this role ownership of policy, system settings, and exception approvals. Establish an escalation path to treasury and controller teams so blockers are removed fast. Have the coordinator run training, reminders, and cut-off confirmations before each cycle.
Measure outcomes such as participation rate, days to settle, and exception aging. Tie results to performance goals to keep focus strong across regions. Nominate the coordinator today and formalize the charter and decision rights.