What is cash pooling? Enhance liquidity across accounts

Cash pooling—a treasury strategy that brings together scattered balances to create a unified view of corporate liquidity—simplifies managing multiple bank accounts across regions or business units.

By centralizing cash across entities, businesses can reduce idle funds, minimize borrowing costs, and improve overall financial efficiency.

But is cash pooling allowed in the USA? What considerations need to be made? Keep reading to learn more about cash pooling and if the strategy is right for your business.

How does cash pooling work?

Cash pooling centralizes a company's cash resources by combining balances from multiple accounts across different subsidiaries, divisions, or regions.

The primary goal is greater financial efficiency through economies of scale. Rather than having scattered pockets of cash throughout an organization with some accounts showing surpluses while others face deficits, pooling creates a singular structure that treats corporate cash as a single resource.

By consolidating liquidity management, treasurers get better visibility into their organization's overall cash position. It can optimize interest yields and reduce transaction costs that would otherwise be incurred through multiple separate accounts.

What are the types of cash pooling?

Cash pooling comes in two main varieties: notional and physical. Companies typically choose an approach based on their organizational structure, geographic footprint, and the regulatory environment in which they operate.

Notional cash pool

Notional cash pooling is a way to group the balances of different bank accounts without actually moving any money. The bank adds up all the account balances and calculates interest as if they were in one big account, but each account still keeps its own money and control.

One big benefit is that it’s easy to set up and doesn’t interrupt daily operations. Since no money is moved, it saves on transaction fees and works well for companies that operate in different countries or want to keep their accounts separate.

However, this method can raise legal and regulatory concerns in some places because the money is treated like it’s shared, even though it isn’t. Banks usually need special legal agreements, like cross-guarantees, to protect themselves in case one account goes into debt.

Physical cash pool

Physical cash pooling, also called zero-balancing or target-balancing, means actually moving money between accounts. In this setup, extra cash from different company accounts is regularly moved into one main account—either bringing the others down to zero or leaving a predetermined, set amount in them.

The primary benefit of physical pooling is complete centralization of cash management.

Because the money is physically moved, it creates a clear audit trail, which can simplify regulatory compliance. However, it also creates internal loans between parts of the company, which need to be tracked carefully and may have tax implications. It’s important to plan well so that each account still has the cash it needs to operate.

What are the pros and cons of cash pooling?

Pros of cash pooling:

The benefits of cash pooling are clear.

• Improved liquidity management: Centralizing cash allows companies to offset deficits and surpluses across accounts, reducing idle balances.
• Lower borrowing costs: By using internal funds more efficiently, companies can reduce reliance on external financing.
• Better interest rates: Pooled cash can earn higher interest or reduce interest on overdrafts.
• Greater visibility and control: Treasury teams gain a clearer, real-time view of the company’s overall cash position.

Cons of cash pooling:

Along with the upsides, what are the risks of a cash pool?

• Regulatory and tax complexity: Especially with physical pooling, intercompany loans can trigger compliance, transfer pricing, and withholding tax issues.
• Legal risks: Notional pooling may raise concerns about co-mingling of funds and require cross-guarantees.
• Operational challenges: Implementing and maintaining pooling structures requires strong systems, accurate forecasting, and coordination across entities.
• Restrictions in some regions: Certain countries, including the U.S., have limitations or regulations that restrict the use of notional pooling.

Is cash pooling allowed in the U.S.?

Cash pooling is partially allowed in the U.S., but with important restrictions.

Notional pooling (where funds are combined virtually without moving money) is generally not allowed due to U.S. banking regulations like Federal Reserve Regulation W and FDIC insurance limits. Meanwhile, physical pooling (where funds are actually moved between accounts) is more commonly used and allowed, but it must comply with strict intercompany lending, tax, and regulatory rules.

To work around these limits, many multinational companies use modified treasury structures—like in-house banking or interest optimization programs—that achieve similar benefits while staying compliant.

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‍_{1) Ramp Business Corporation is a financial technology company and is not a bank. All bank services provided by First Internet Bank of Indiana, Member FDIC.}

_{2) Get up to 2.5% in the form of annual cash rewards on eligible funds in your Ramp Business Account. Cash rewards are paid by Ramp Business Corporation and not by First Internet Bank of Indiana, Member FDIC. Cash rewards are subject to change. See the Business Account Addendum for more information.}

_{‍3) Customers with a Ramp Business Account can use the ICS service provided by IntraFi Network LLC. Ramp is a financial technology company, not an FDIC-insured depository institution. Banking services are provided by First Internet Bank (FIB), member FDIC. Subject to the terms of the applicable ICS Deposit Placement Agreement, FIB will place deposits at FDIC-insured institutions through IntraFi’s ICS service. A list identifying IntraFi network banks appears at https://www.intrafi.com/network-banks. Certain conditions must be satisfied for “pass-through” FDIC deposit insurance coverage to apply. To meet the conditions for pass-through FDIC deposit insurance, deposit accounts at FDIC-insured banks in IntraFi’s network that hold deposits placed using an IntraFi service are titled, and deposit account records are maintained, in accordance with FDIC regulations for pass-through coverage. Deposits are insured by the FDIC up to the maximum allowed by law; deposit insurance only covers deposits in the Ramp Business Deposit Account in the event of the failure of the FDIC-insured bank.}