Intercompany netting is a treasury technique that settles balances between group entities by offsetting mutual payables and receivables, so that only the net difference is actually paid. If entity A owes B 100 000 euros and B owes A 80 000, a single transfer of 20 000 replaces two transfers totalling 180 000.
Two forms exist. Bilateral netting offsets balances between two entities only. Multilateral netting runs across the whole group through a netting centre, usually the holding company: every entity settles a single net position against the centre rather than a web of positions against its siblings. A group of ten entities has forty-five possible bilateral pairs; multilateral netting reduces that to ten flows.
The gains are concrete and measurable. Fewer bank transfers means lower transaction fees. Fewer cross-border flows means less foreign exchange conversion and less spread paid to the bank. A fixed netting cycle, typically monthly, also makes intragroup cash positions predictable instead of being discovered on the day.
Netting is not cash pooling. Cash pooling physically or notionally centralises cash balances; netting only settles what entities owe each other. They are often deployed together, but they solve different problems. In France, offsetting between two entities relies on legal set-off under article 1347 of the Civil Code, which requires the debts to be certain, liquid and due.
The precondition is reconciliation. You can only net what both sides agree on. A single intercompany mismatch in the netting run means the wrong amount is settled, and the error propagates into the next cycle. Phacet's intercompany flow reconciliation agent validates the reciprocal accounts before the cycle runs, so the netting position rests on agreed balances rather than on declared ones. See the treasury and cash hub for the wider cash workflow.
