Insurance companies have a huge pool of funds to balance the outflow of compensation funds and the funds of new policies.
Banks also have a huge fund pool, and the inflow and outflow of loans and deposits keep this fund pool basically stable.
The fund is also a pool of funds for subscription and redemption, which makes the funds available for investment in a relatively stable state.
The cash pool is also called the cash pool. The fund management model was originally developed by the finance companies of multinational corporations and international banks to uniformly distribute the global funds of the group and minimize the net positions held by the group. The fund pool business mainly includes account balance transfer of member companies, daytime overdraft of member companies, active receipt and payment, entrusted lending between member companies, and interest bearing of member companies on deposits and loans of the group headquarters. Different banks have different expressions about cash pools.
Citibank defines cash pool as: cash pool structure is an automatic allocation tool for inter-enterprise fund management, and its main function is to realize centralized control of funds. The cash pool structure includes a main account and one or several sub-accounts. The automatic transfer of cash pool funds usually occurs at the end of the day, and the amount transferred depends on the end of the day and the target amount of each sub-account. In the end, the balance of each sub-account is the set "target balance", and all the remaining funds will be concentrated in the main account.
In the 2006 Asia-Pacific Cash Management Guide, HSBC defined the cash pool as: cash pool, also known as total interest, which offsets the balances of multiple accounts and calculates the interest on the net balance. This is to transfer the balance of multiple accounts through the transfer mechanism, so that funds can be substantially transferred and arranged centrally between accounts. The types of fund pools include zero balance account (ZBA), target balance account (TBA) and automatic investment account.
At present, many domestic commercial banks, such as China Merchants Bank, put forward the fund pool management, which is to realize the centralized operation of funds by means of fund transfer and scheduling under the circumstances that there is no transaction background, interest needs to be hedged, account balance can still be separated and account balance is concentrated, and the flexible use of entrusted loans to the greatest extent. In the cooperation between the group and the bank, the bank is the lender, the group company and its subsidiaries are the entrusted borrowers and borrowers, and then a package of entrusted loan agreements are realized through e-banking, so that the original business that needs to be handled separately becomes an intensive business and process, and the unified operation and centralized management of the group funds are realized.
The centralized fund management mode of some large enterprise groups in China includes two lines of revenue and expenditure, internal banks, fund settlement centers and financial companies, and most of them are settlement centers and financial companies. The fund settlement center is usually a specialized organization established within an enterprise group, which handles cash receipts and payments and current settlement business of all member units of the group. Usually set up in the finance department, it is a functional department that independently operates funds. The Finance Company is a non-bank financial institution approved by the People's Bank of China and established under the Group to provide supporting financial services for the development of group members.
Within the framework of the cash pool, the group company and its subsidiaries are entrusted borrowers and borrowers. The overdraft of subsidiaries in the fund pool is a loan, and interest should be paid; On the contrary, the deposits in the pool are interest-bearing loans. Therefore, the cash pool has formed a close strategic alliance relationship between the group and commercial banks, which has a unique management effect. Even if the group manages funds through settlement centers or financial companies, it should also introduce the cash pool model to make the group's fund management system and process more efficient.
[Edit] Main functions of cash pool
With the continuous expansion of market globalization, it is increasingly urgent for enterprises to manage and concentrate their current assets. At the same time, the acquisition or merger of enterprises brings new management system, connection with banking industry and account structure, which makes the process of enterprise financial integration more complicated. Therefore, in the process of reducing costs, promoting automation and process merging, enterprises have been facing various pressures.
Usually, subsidiaries want to maintain relations with local banks or put their funds in local banks. This requirement of subsidiaries must be considered in the process of centralized asset management of the whole group. On the other hand, from the head office's point of view, it is an important link to limit the number of bank accounts within a reasonable range, or to manage funds in a unified way at the head office level, which embodies the advantages of centralized management of group assets.
At the same time, the restrictions of national laws and regulations are constantly relaxed, which provides a more convenient environment for the effective management and utilization of enterprise funds. For example, the state has issued a series of laws and regulations to encourage the development of regional headquarters of enterprises, making RMB cash pool a popular current asset management scheme. In addition, the introduction of foreign exchange cash pool regulations also provides a basis for enterprises to manage their foreign exchange more effectively.
Specifically, for the financial directors of multinational companies, especially group companies with many subsidiaries in China, liquidity management is particularly important. Generally speaking, the chief financial officer has four main purposes in managing enterprise liquidity: one is to manage and control the liquidity demand of the whole group at the level of the group company; The other is to reduce the cost of capital; The third is to obtain the highest return on capital on the premise of ensuring liquidity; Fourth, actively manage idle funds through short-term investment.
Accordingly, through the establishment of cash pool structure, the main improvements to corporate finance are as follows.
First, reduce interest costs. The automatic centralized capital structure reduces the demand of group companies for RMB loans. The internal financing cost of the company can be set lower than the loan interest rate of the People's Bank of China. However, in order to avoid the transfer pricing problem, the interest rate must be set according to the "normal trading relationship", in other words, the interest rate level must also be applicable to similar transactions with third parties.
Second, improve liquidity management. In the fund pool structure, each sub-account will keep the lowest fund balance to fully improve the fund utilization rate and liquidity of the whole group. At the end of the day, the surplus or deficit of any sub-account balance will be remitted to the main account. In this way, excess liquidity can be better managed and controlled-surplus funds can be transferred from the accounts of some subsidiaries participating in the cash pool to fund other cash-strapped entities.
Third, save management costs. Maintaining a small amount of RMB loans can reduce the cost of the company's fund account management. In addition, the reporting service can provide detailed information reports to simplify the monitoring process of the cash pool. Citibank's liquidity management system includes a set of coordinated predefined reports, and the account status is tracked through Citibank's electronic banking system.
[Editor] Several specific problems needing attention in the operation of cash pool
In essence, cash pool is a management concept and policy. Its effective operation and expected effect require a comprehensive design and careful organization of the complex fund distribution and control system among the group, member units and banks.
1. Select the appropriate cash pool operation mode.
Group cash pools are usually completed with the support of external banking systems, and are divided into physical pools and conceptual pools.
The entity cash pool is a zero-balance collection of accounts, which refers to managing the cash of several branches (subsidiaries) by cash concentration or cash settlement, and the branches (subsidiaries) complete business separation through zero-balance sub-accounts. For example, the basic operation of cash pool management introduced by China Merchants Bank is that the head office of the group collects the fund positions of the accounts of all member enterprises every day and concentrates them in the "cash pool" account of the head office of the group; With the funds in the cash pool and the unified credit line applied to China Merchants Bank as the guarantee, the head office of the group agreed on the daytime overdraft line of each member enterprise; Within the agreed overdraft limit, if the balance of the member enterprise's daytime account is insufficient, it will make independent external payment in the form of account overdraft; Finally, the head office of the Group and China Merchants Bank will make a unified liquidation, and make up the overdraft amount of each member enterprise with funds from the fund pool or financing under the credit line.
Nominal cash pool refers to the comprehensive surplus generated by different cash positions in bank accounts to offset the comprehensive deficit. Its operating mechanism is: the companies participating in the cash pool keep the accounts that the currency belongs to the cash pool, and then the bank integrates all the participating accounts to make a net amount to reflect the cash situation, and there is no actual fund transfer.
Although the members of the cash pool belong to the same parent company, they still maintain legal and tax separation. Because the laws of our country restrict the lending behavior between enterprises, the subsidiaries in the group mainly manage the entity cash pool through "entrusted loans" (or agreement transfer).
In addition, according to whether it is mainly used to inspect banks, cash pools can be divided into cash pools intermediary by banks and cash pools intermediary by financial companies of enterprise groups.
Many-to-many entrusted loans are adopted in the cash pool with banks as the intermediary, that is, each legal person company may be the provider of entrusted deposits or the demander of entrusted loans, and the balance of entrusted deposits in the cash pool is not less than entrusted loans. The part of the accounts of group enterprises and corporate affiliates that exceed the target balance (since stamp duty and business tax on interest income are required for each entrusted loan, zero-balance accounts are uneconomical and unnecessary) are deposited in entrusted deposit accounts or entrusted loans with the earliest repayment time are borrowed. If there is a request to borrow entrusted loans, the balance of entrusted deposits in the fund pool is less than that of entrusted loans, and the balance of entrusted deposits is less than that of entrusted loans, resulting in an account overdraft of the capital-demanding enterprise.
In the cash pool with the financial company of the enterprise group as the intermediary, the service is still provided by the bank. The difference is that banks do not appear as entrusted loan intermediaries, but as fund pool software and payment intermediaries. Its principle is much simpler than the pool of funds mediated by banks. The surplus funds of corporate companies within the group are uniformly deposited into the entrusted deposit account of the finance company. Enterprises that need funds borrow entrusted loans when entrusted deposits are greater than entrusted loans. The borrowed entrusted loan is not enough to pay for the requested part, which can be solved by providing working capital loans by banks or finance companies.
2. Internal systems required for cash pool management.
In essence, the cash pool is a system for the group to centrally manage and control funds. Through training and internal communication, we should build a corporate culture that maximizes the overall efficiency and competitiveness of the group, rather than taking the cost of a single fund business of a subsidiary as the guide. The recognition, support and cooperation of the management of subsidiaries to the cash pool is the most critical basic premise.
As the subsidiary is an independent legal person, the holding ratio of the parent company to the subsidiary is different, including wholly-owned, absolute holding and relative holding. Therefore, to promote the cash pool, it is necessary not only to negotiate with the "minority shareholders" of subsidiaries, but also to design different centralized management systems according to the "depth" and "breadth" of cash concentration. In addition, under the existing system, the Group must be particularly cautious when bringing listed subsidiaries into the management scope of the Group's cash pool. (See the embarrassment and failure of centralized fund management for details. )
With the management of cash pool, it is urgent to establish and improve a series of systems such as internal operation flow, internal post responsibilities, information communication, fund authorization division, fund classification budget, internal entrusted loan rules, internal audit and performance evaluation. Taking the capital budget as an example, we should focus on the process of "capital budget-capital approval-capital operation-business control-risk prevention-decision support" to achieve annual budget, monthly balance and daily scheduling. In the fund management of the group, we must adhere to the fund management principles of no plan, no work, no budget and no money, strengthen the comprehensive fund budget management, and strictly control the flow of funds according to the budget.
3. Group headquarters should focus on improving the four capabilities.
The implementation of cash pool business tests whether the subordinate enterprises of the group can obey the overall situation and put the maximization of the overall interests of the group rather than the local interests of its subsidiaries first. Relatively speaking, the biggest test is the group headquarters, because the cash pool business has completely pushed the group headquarters to the forefront of the entire group's fund allocation and is the "bridgehead" of the group's fund management. Group headquarters must have a strong ability of capital planning, timely allocation of funds and investment decision-making. However, according to our investigation and analysis, the biggest obstacle for some groups to implement the cash pool business may be the weakness of the group headquarters, which "always" cannot get up.
Establishing a strong group headquarters for fund management is an institutional arrangement for cash pool business to achieve long-term and substantial results. To this end, the group headquarters upgraded four capabilities.
The first is centralized and unified external financing capacity. The reason why the cash pool is called "pool" must be based on sufficient cash reserves. The head office should be able to grasp the total scale of capital demand within the group through calculation and analysis, and ensure its strong financing ability and sufficient cash supply through the centralization and unification of financing rights.
Secondly, the capital dispatching ability of the group headquarters. The cash pool business is to transfer funds from accounts with surplus positions to overdraft accounts in the form of entrusted loans for intra-group transfer. The group not only manages loan issuance, but also is responsible for fund recovery. This cross-regional, cross-industry and cross-enterprise scheduling and configuration is a high-risk financial management business. It is necessary to improve the efficiency of capital use, ensure the safety of funds and prevent the group's capital chain from breaking.
The third is the capital control of the group headquarters. Relying on the cash pool platform, the group headquarters improves the fund management system and realizes the standardization, standardization and integration of fund management and control. The object of group management and control is not only cash resources and their allocation, but also the ability to go deep into the internal operations and business operations of its affiliated enterprises, pay close attention to the future product competitiveness, business field optimization and market share growth of its affiliated enterprises, and combine cash pool management with business operation management.
Finally, the headquarters' excellent service ability to subordinate enterprises. The cash pool business requires the headquarters to organically combine the management and services of affiliated enterprises, integrate services into management and strengthen services in management. This service includes three levels: one is to provide financial services to ensure the normal capital needs of subordinate enterprises; Secondly, information services in capital, market and other aspects; Finally, the headquarters should provide financial management guidance and consulting services to subordinate enterprises in a timely manner.
[Edit] Cash pool instance
The establishment of cash pool has been widely used at home and abroad. The most famous company in the world is GE's "cash pool", and the more successful companies in China are PetroChina and Guangdong Communications Group. Now, taking GE's "cash pool" in China as an example, the best practice of cash pool is described in detail.
In August, 2005, the State Administration of Foreign Exchange approved General Electric (ge) to determine that China Merchants Bank would implement the US dollar cash pool business in China through bidding. GE currently has 82 cash pools around the world. This tender is the first time that GE has used a cash pool to manage US dollar funds in Chinese mainland. GE's investment in China began at 1979, and so far more than 40 business entities have been established, with the investment scale exceeding1500 million USD. The investment business includes more than ten industries or departments such as high-tech materials, consumer and industrial products, equipment services, commercial financing, insurance, energy, infrastructure, transportation, medical care and consumer finance. GE's sales in China increased from 20065430. With the expansion of business, due to cross-regional and cross-industry reasons, the problem of centralized cash management of member companies also appears. Before GE's cash pool was put into use, 40 subsidiaries of GE fought their own battles on the use of foreign exchange funds. Some companies deposit in banks, while others borrow from banks, which affects the efficiency of the use of funds. Only in 2002 did its RMB business realize centralized management and control, and the centralized management of RMB was also implemented by CCB through cash pool business.
Most of GE's sales revenue in China is USD assets. Before 2004, China's foreign exchange fund management stipulated that no matter whether there was equity relationship between two enterprises, they could not transfer funds in foreign currency. This actually means that for multinational companies in China, even if the subsidiaries have money in their accounts, the parent company cannot use it. As a result, GE's USD business in China cannot be managed centrally. Until June 5438+ 10, 2004, the State Administration of Foreign Exchange issued the Notice on the Internal Operation and Management of Foreign Exchange Funds of Multinational Corporations, pointing out that "the foreign exchange funds between members of multinational corporations can be borrowed through entrusted loans". In this case, GE cooperated with China Merchants Bank to avoid policy barriers and realize the capital control of subsidiaries by the headquarters of multinational companies. In addition, in the past, the international business of 40 subsidiaries of General Electric negotiated with banks respectively. Once the foreign exchange funds are taken away by ge headquarters, the international business of each subsidiary will be unified to China Merchants Bank.
GE Company has set up a parent company account in China. At 4 o'clock every afternoon, the banking system automatically scans the detailed accounts, clears them, and operates in strict accordance with the cash pool. For example, Company A enjoys an overdraft limit of $6,543,800,000 in the bank. At 4 o'clock in the afternoon, the system computer began to scan automatically and found that the account was overdrawn by 800,000 US dollars, so it withdrew 800,000 US dollars from the cash pool of the group company and emptied the account. If Company A has not deposited in the cash pool of the group company before, it will be recorded as borrowing 800,000 dollars from the group company, while if there is a surplus of 6,543.8+0,000 dollars in the account of Company B, it will be transferred to the cash pool and recorded as an apology to the group company. After all the funds are concentrated in the group company, the total amount shown is $200,000.
This way, member enterprises in the group can enjoy the capital resources: the funds of member enterprises in the group can be concentrated in a "cash pool", and at the same time, member enterprises can use the funds in the pool conditionally according to the requirements of financial management in the group. Headquarters cash pool accounts collect the actual balance of bank accounts of member companies. When the bank account of a member company receives funds, the funds will be automatically collected into the cash pool account of the headquarters. The actual funds in the bank account of each member company are zero, and the total amount of funds paid by each member company does not exceed the "overdraft limit" specified by the group; When a member company has funds to pay, the bank account of the member company will be linked with the account of the headquarters fund pool to record the information of fund changes in real time; The implementation of the "cash pool" management of group funds has revitalized the deposited funds and improved the utilization rate of funds. By controlling the available amount in the management process, the risk of capital risk is successfully reduced.
Essentially, China Merchants Bank's GE dollar cash pool project is a flexible use of entrusted loans. In the cooperation between the two parties, the bank is the lender, the group company and its subsidiaries are the entrusted borrowers and borrowers, and then a package of entrusted loan agreements are realized through e-banking, which makes the original businesses that need to be handled one by one become intensive businesses and processes, thus realizing the unified operation and centralized management of the foreign exchange funds of the whole group.
[Editor] Thoughts on the Fund Management of State-owned Enterprises
Ge's case is actually a practice about centralized management of group funds. Cash pool is just one of the group's fund control modes. However, the financial management concept and fund control technology shown by this model are worth summarizing, popularizing and popularizing. Group headquarters should play the role of "headquarters", not only to monitor the income and expenditure of subsidiaries in real time, but also to strengthen the internal fund adjustment, flexible fund position, optimize fund allocation, reduce the cash holding scale, speed up capital turnover and improve the overall fund use efficiency of the group. The company's headquarters is "unable" to control the company's funds, and each holding subsidiary is fighting for itself. The phenomenon of laissez-faire is not a case. Practice shows that the decentralized cash control system will reduce the company's profitability and increase the company's financial risks, and centralized financial management focusing on cash flow control is the only reasonable institutional arrangement.
Similar to GE's cash pool business, the centralized management mode of some large domestic groups has two lines of revenue and expenditure, the establishment of internal banks and settlement centers, and the use of group finance companies, among which settlement centers and finance companies are the most common. Settlement centers are usually set up within enterprise groups. A specialized agency that handles cash receipts, payments and transaction settlement among group members, usually located in the financial department, is the functional department of fund operation. The finance company is a non-bank financial institution under the group company approved by the People's Bank of China. It was established as a subsidiary of a group company. Although both the settlement center and the finance company rely on external commercial banks to perform their duties, for the "cash pool" business, the group's fund management mainly depends on commercial banks, or banks have become one of the management subjects, realizing the centralized operation of funds of all members of the group and the enjoyment of funds within the group, rather than just a "supporting role" in fund management and control. Compared with settlement centers or financial companies, the introduction of cash pools can fully enjoy the settlement of funds provided by banks.
Group headquarters should focus on improving the ability of capital planning, dispatching, distribution and investment decision-making. The development of cash pool business tests whether the subordinate enterprises of the group can obey the overall situation and put the overall benefit of the group in the first place, and also tests the service level and quality of banks. But relatively speaking, the biggest test is the group headquarters, because the cash pool business has pushed the group headquarters to the forefront of the whole group's fund allocation and become the "bridgehead" of the group's fund management. Group headquarters must have a strong ability of capital planning, timely allocation and investment decision-making.