transferred or invested). In the event of deficiency, borrowings should be resorted to or
transfer from surplus subsidiaries arranged.
- Decisions of Cash Management
The Group Cash centre should take decisions regarding the transfer of funds either from a
country towards the centre or from country to country to effect balancing. Several
solutions are possible. For example, the centre may give orders of transfer to the
company having excess funds towards the company with a deficit.
In order to obtain the desired amount of cash, resort to Interbank transfers or credits may
also be made.
The choice between these different sources depends upon the rate of interest in each
country, cost of exchange operations, possibilities of credits from local banks, etc.
Very often, transfers take place from or towards the central pool which becomes a sort of
compulsory point of passage for transfer of funds. This is logistically convenient too as
transfers take place in different currencies and the centre should take the responsibility of
covering of the exchange risk.
- Management of receivables
The management of receivables in a multinational group should take into account several
factors, such as :
- Costs of creation, retention and recovery of receivables;
- Degree of liquidity of receivables.
The management of intra-group receivables is different from that of external clients.
- Intra-group Receivables
When a parent company has receivables of a subsidiary, it can use the technique of leads
and lags for advancing or delaying settlements as per its needs. For instance, in order to
finance an investment abroad it may decide to accord or make a subsidiary accord delays
longer than those accorded normally for the sale of capital equipment.
- Receivables from External Clients
If a parent company is in receipt of receivables (as payments of its exports) issued
in strong currencies and if national currency depreciates, the company may wait till the
last limit to encash the receivables. On the other hand, if the receivables are issued in a
weak currency, it will be in the interest of the company to expedite recovery of the
receivables.