1. In House Banking: The Basics
In house banking involves centralizing cash management in a company. While in-house banking has
its advantages like better cash flow and easier accounting, it also has its share of disadvantages. This
article discusses all you need to know about in-house banking.
Advantages of In House Banking;
The need for in house banking was felt because of the different borrowing patterns of the subsidiaries
of a company, and many other factors. Let us look at the advantages of in house banking.
1)If your company has subsidiaries or chains elsewhere, some of them may be borrowing loans at a
higher interest than other subsidiaries, owing to differing regional interest rates. In house, banking lets
surplus flow to the cash strapped subsidiaries.
2)If one subsidiary sells currency, another buys it, then it is an untenable position for a company. In
house banking helps balance out this discrepancy.
3)It allows you to pool the resources distributed across various subsidiaries.
4)Accounting procedures become more manageable.
5)Transparency of financial statements is maintained, as it makes it less easy for a company to
hedge records through its subsidiaries. Besides, it makes the management at each subsidiary more
accountable to the parent company, since the company can see exactly where every penny is spent.
Is Your Business Eligible for in house banking?
1) Size
The jury is still out on how large the company should be in order to go for in house banking. Some
argue that in order to be eligible for in house banking, a company needs to have many subsidiaries
and units. It is not something meant for an ordinary firm, let alone a small business.
2) Revenues
A company's revenues are not important if you are considering in house banking. If your revenue
management is unstructured, or creates difficulty in accounting and auditing, then you should
consider in house banking.
How in house banking works;
The in house bank transfers funds to subsidiaries of a company once a month. The credit and debit
record of the subsidiaries is updated daily. Any payment that is to be made by the subsidiary must be
authorized by the in house bank. It is too labor- and cost intensive to create a full-fledged in house
bank; but some activities, like foreign currency trading, can be taken over by an in house bank.
In house banking: Outsourcing
Sometimes, staff not trained to run an in house banking operation would not be able to deliver. This is
the reason why many companies turn over their operations to banks, since they are the ones who are
the experts. With advantages like transparency, cost effectiveness and better utilization of funds, it is
no wonder that many larger firms are turning to in house banking.
If you need to know more about in house banking procedures, you can consult an expert in the field
who will explain to you the details of establishing an in house bank.

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