Payments Netting in Multinational Cash Management

Abstract

Thornend Communication Systems (TCS) is a multinational enterprise of medium size with head offices in London, and operating subsidiaries in the United Kingdom, the United States, France, Germany and Sweden. It specialises in the manufacture of telephone switchgear, and there is a great deal of trade between the subsidiaries as switchgear components made in one country are assembled together in another. At 31 March 1989, all the debts owed by subsidiaries in one country to subsidiaries in another were translated into pound sterling terms by reference to the exchange rates then prevailing. In units of £10000, the debts at 31 March appeared as follows:

			Paying companies
Receiving companies	UK	USA	France	Germany	Sweden	Total
UK	—	41	16	9	31	97
USA	52	—	18	23	47	140
France	27	50	—	8	16	101
Germany	12	29	6	—	22	69
Sweden	22	11	18	34	—	85
Total	113	131	58	74	116	492