Why companies gather the balances
Scattered balances hide the position. Money sitting in separate operating accounts is harder to see, to explain and to put to work, and a treasurer who cannot state the position cannot defend a decision about it. Concentration answers that with one position built from accounts the company already holds. It can reduce manual transfer instructions through scheduled sweeps, and it places the surplus under one instruction instead of leaving each account to fund itself. The technique is a control as much as an efficiency measure.
How the balances are gathered
- Identify the accounts and how they relate. List the accounts that will take part, with the entity, the bank and the currency each one belongs to. The relationship decides which account can receive from which.
- Define the destination account. One account receives the balances. This is the concentration account, and the master account with its subaccounts is the same structure under a regional naming convention.
- Set the sweep rule and its frequency. Each participating account keeps a target balance and the surplus moves on a schedule. Zero balance and target balance are the two common rules, and the close of each day is the usual anchor.
- Record and reconcile what moved. Each movement is a bank transaction. It has to be recorded, reconciled on both accounts and explained if it is questioned.
Example: two accounts and a sweep that empties one
The figures are illustrative and stated in US dollars. Penrose Textiles holds an operating account with USD 48,000 and a concentration account with USD 12,500. Before any movement, the consolidated position is the sum of the two balances: 48,000 + 12,500 = 60,500.
The company sets a zero balance rule for the operating account and instructs the sweep at the close of the day. USD 48,000 moves into the concentration account, and the operating account is left at zero. The concentration account then holds 12,500 + 48,000 = 60,500, and the operating balance is 48,000 – 48,000 = 0.
The consolidated position is the sum of what is left in each account, and it is the same on both sides of the movement: the sweep changes where the money sits, not how much of it there is. The movement followed an instruction the company gave, and that decision sits with the company rather than with the software. Each movement is its own bank transaction, so it has to be recorded and reconciled afterwards.
How the sweep frequency is set
The arrangement can sweep at day end, during the day or when an agreed trigger is met. Frequency depends on the banking service, operating needs and authorization rules. Day end is common, but it is not the definition of concentration; a threshold or funding need can also trigger a movement.
The structure and the sweep are one arrangement
The master account with its subaccounts is the structure, and the scheduled sweep is the mechanism that feeds it, so the two belong together. The sweep classes in use are zero balance, target balance, fixed, investment and threshold. A sweep is not concentration by itself: the relevant question is whether it centralizes balances. An investment sweep deploys cash into an investment and may follow concentration or form part of the same arrangement. The account label alone does not determine the function.
Where the boundaries sit
The movement is executed first and its reconciliation comes afterwards, which is the order that separates this technique from bank reconciliation. A cash flow forecast projects flows that have not happened yet, while here the balances already exist. Working capital is a measure built from the balances rather than a movement of them. Payment reconciliation matches a payment to what it settles, a different question.
Checking that the sweep reached the destination
A sweep reduces one bank balance and increases another; counting the incoming leg as new cash would overstate the group’s position. Simetrik’s cash position controls reconcile bank and internal records across accounts and expose transfers whose two sides have not yet arrived in the available data.
The treasury team still needs the sweep agreement, value dates and account restrictions to interpret that position. The discussion of reconciliation and liquidity visibility explains why a reported balance and cash available for the next obligation can differ.