Corporates embrace intercompany netting to drive efficiency
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Treasury

Corporates embrace intercompany netting to drive efficiency

Many corporates are realising the benefits of intercompany netting on FX risk, trading and cash-flow visibility.

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Photo: Reuters

As they emerged from the pandemic, the treasury team at luxury retail brand Christian Louboutin was looking for a way to more accurately manage the impact of the brand’s payments between subsidiaries.

Primary shipment flows are completed by the company’s master distribution entity. However, merchandise can be transferred between locations to meet customer demand, resulting in a web of intercompany invoices to account for the movement of goods.

With each transfer, the sending entity would invoice the receiving entity and then wait to be paid. There were no standardized processes or procedures to resolve or escalate disputes between parties and no visibility into the exact number and scale of the transfers taking place each month.

“With more than 150 stores, it had become too inefficient to centralize and rationalize all these flows using manual systems,” explains Annabella Lopes, senior treasury manager credit risk and netting at Christian Louboutin. “Our key goals for the netting initiative included implementing an automated reconciliation and settlement solution to alleviate friction and manual effort, eliminate neglected transactions, and gain full visibility into those processes.”


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