Cash pooling is a treasury arrangement that centralises the cash of several group entities so that the surpluses of some offset the deficits of others. Without it, one subsidiary can hold 2 million euros earning almost nothing while another borrows 1.5 million at 5 percent, inside the same group.
Two forms exist, and the difference is whether money actually moves. Physical pooling transfers balances to a centralising account, usually through zero balancing. Notional pooling leaves balances where they are and offsets them only for interest calculation. The first creates real intragroup positions; the second does not.
The gains are direct: reduced net borrowing, better negotiated rates on a consolidated position, less idle cash, and a group cash view that no longer depends on collecting bank statements entity by entity.
In France the arrangement sits inside a legal frame that cannot be skipped. Intragroup cash advances are an exception to the banking monopoly under the Monetary and Financial Code, and they require a capital link between the entities. A written treasury agreement must set out the terms, and the interest rate must be arm's length: an interest-free advance between related entities is exposed to reassessment as an abnormal act of management.
Cash pooling is not intercompany netting: pooling centralises balances, netting settles what entities owe each other. Both rest on positions that both sides agree on, which is what the intercompany flow reconciliation agent establishes upstream. See the treasury and cash hub.
