Keep company cash by legal entity: group ownership does not make every bank balance interchangeable

A corporate group can own several subsidiaries and manage treasury centrally, but each company remains a separate legal person. Cash held in one subsidiary's bank account belongs to that company, not automatically to the parent or a sister company. Moving it requires an identifiable transaction such as a loan, dividend, capital contribution or payment on behalf of another entity.

Start with the legal owner of each bank account

Maintain a bank-account register showing the legal account holder, country, currency and purpose. Group dashboards can aggregate cash for visibility without erasing ownership.

Do not treat the parent company's access to a subsidiary portal as evidence that the parent owns the subsidiary's money.

Avoid paying another company’s invoices without a defined entry

A central treasury company can pay on behalf of subsidiaries, but the accounting should create the corresponding intercompany balance or recharge.

Direct payments with no intercompany record can make expenses, VAT and cash ownership difficult to reconcile.

Use intercompany loans for temporary funding

Where one entity provides cash that the other is expected to repay, document an intercompany loan with amount, currency, term and interest where appropriate.

Transfer-pricing and tax rules can apply, especially cross-border.

Use dividends only where the paying company can legally distribute

A subsidiary with surplus cash can pay a dividend to its parent if it has sufficient distributable profits and follows company-law procedures.

Cash in the bank is not enough on its own. A profitable group can still contain one subsidiary that cannot lawfully dividend its balance.

Cash pooling still needs entity-level records

Zero-balancing or notional pooling can centralise liquidity while the accounting records each entity's position. Treasury technology does not remove the underlying legal claims.

Keep pool balances and intercompany interest reconciled to each participant.

Show both group cash and local liquidity

The board can see total group liquidity, but subsidiary directors need to know whether their own company can meet payroll, tax and creditors.

Do not sweep every subsidiary to zero if local legal, regulatory or operational requirements need a minimum balance.

Worked example: Parent Ltd sees £2 million in Subsidiary A and £50,000 in Subsidiary B. Subsidiary B needs £400,000 for payroll. Treasury can move £350,000 only through a documented intercompany transaction, not by assuming all group cash is one legal pool.

Use clear bank references such as "IC LOAN B OCT26" rather than generic internal transfers. That helps accountants on both sides post the movement consistently.

Reconcile intercompany cash monthly. If one company records a dividend while another records a loan, consolidated accounts may hide the mismatch temporarily but statutory entity records remain wrong.

Worked example: a group treasury team sees £8 million across four companies. Two subsidiaries have borrowing agreements that restrict upstream loans, and one holds £1 million needed for local VAT and payroll. The parent therefore cannot treat all £8 million as free central cash even though it can see every account in one dashboard.

Use intercompany settlement accounts consistently. If Parent Ltd pays a £200,000 supplier invoice for Subsidiary C, record the intercompany receivable and payable at the same time rather than waiting for month-end accountants to discover the mismatch.

Review local director duties for overseas entities before central sweeps. Subsidiary boards can have obligations to creditors and local law that limit how much cash they can send to the parent.

Keep group treasury policies clear on minimum local liquidity. Centralisation should reduce idle cash without leaving a subsidiary dependent on an emergency parent transfer every time payroll is due.

For acquisitions, keep acquired company accounts separate until legal ownership, mandates and intercompany policies are fully integrated. Sweeping a newly acquired subsidiary immediately can create tax, covenant or local-law issues before treasury has reviewed the entity.

Use entity codes in bank references for central payments and receipts. This makes it easier to identify which company economically owns a transfer even when one treasury team operates several accounts from the same workstation.

Keep interest on intercompany balances visible. A central treasury team can move cash daily while month-end tax and transfer-pricing policy requires interest on net balances. Automating the sweep does not remove the need to price and account for the funding relationship.

For regulated or client-facing subsidiaries, add stronger ring-fencing controls. Some balances can be legally or contractually unavailable to the group even where ordinary subsidiaries are free to lend surplus cash upstream.

Document temporary central-funding arrangements during acquisitions, restructurings and tax payments. A one-day parent advance can still be an intercompany transaction requiring posting and later settlement. Short duration does not make legal ownership disappear.