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Background documentationZero Balancing

 

Zero balancing is a process in effective cash pooling where the participant accounts of a master contract are cleared periodically by means of a main account so that their balance is EUR 0.00. This applies to accounts that have a negative or a positive balance. The resultant free liquidity can thus be used to maximum advantage, and a liquidity deficit can be cleared by the corresponding day-to-day business and forward transactions.

Zero balancing has the following scenarios:

In Deposits Management, the following cash pooling methods are available for zero balancing:

  • BVP (without taking into account future value dates)

    In the BVP method, the system ensures that the value date-based balance of the subaccount is EUR 0.00 every day. It takes into account postings whose value dates are before or on the current posting date.

    The system bundles postings with the same value date and executes an aggregated posting to the main account during cash pooling for each value date and subaccount. The system ignores any posting date-based balance. Therefore, the posting date-based balance might not be EUR 0.00, even after the cash pooling.

    Example Example

    Execution date: 2nd January, 2001

    Subaccount

    Posting

    Amount

    Value date

    Resulting transfer amount

    Amount

    Value date

    A

    1

    Credit 100

    01/01/2001

    1

    Debit 100

    01/01/2001

    A

    2

    Credit 110

    01/02/2001

    2

    Debit 110

    01/02/2001

    B

    3

    Credit 120

    01/02/2001

    3

    Debit 120

    01/02/.2001

    B

    4

    Credit 130

    01/03/2001

    -

    -

    -

    C

    5

    Credit 140

    01/02/2001

    4

    Debit 290

    01/02/2001

    C

    6

    Credit 150

    01/02/2001

    The system does not transfer the amount of EUR 130.00 on 01/02/2001 because the SubFinPayt date is after the execution date.

    End of the example.

  • BVPF (taking into account future value dates)

    In the BVPF method, the system ensures that the value date-based balance of the subaccount is EUR 0.00. It takes into account any postings whose value dates are in the future.

    Again, the system bundles postings with the same value date and executes an aggregated posting to the main account during cash pooling for each value date and subaccount. During the daily execution, the system ensures that the value date-based and posting date-based balance of the subaccounts is EUR 0.00. During the weekly execution, the system ensures that the value date-based balance is EUR 0.00 every day, but the posting date-based balance only on the execution date. The system does not clear past balance items for the posting date-based balance.

    Example Example

    Execution date: 2nd January, 2001

    Subaccount

    Posting

    Amount

    Value date

    Resulting transfer amount

    Amount

    Value date

    A

    1

    Credit 100

    01/01/2001

    1

    Debit 100

    01/01/2001

    A

    2

    Credit 110

    01/02/2001

    2

    Debit 110

    01/02/2001

    B

    3

    Credit 120

    01/02/2001

    3

    Debit 120

    01/02/2001

    B

    4

    Credit 130

    01/03/2001

    4

    Debit 130

    01/03/2001

    C

    5

    Credit 140

    01/02/2001

    5

    Debit 290

    01/02/2001

    C

    6

    Credit 150

    01/02/2001
    End of the example.

Note Note

The example scenarios of both methods are the same. Therefore, the following scenarios do not differentiate according to method.

End of the note.