# Netting

> Offsetting what two group companies owe each other so that one payment settles the difference.

Source: https://finconsol.com/blog/glossary/netting/ (updated 28 October 2026)

## Why does it matter in a group?

Netting reduces cash movements between group companies: each pair settles the difference with one payment instead of two. It is a settlement method and does not replace the [elimination entry](/blog/glossary/elimination-entry/). The gross balances still sit in the books of both companies until paid, and must still be compared in the [intercompany reconciliation](/blog/glossary/intercompany-reconciliation/). Check local exchange control and tax rules before netting across borders. Keep the agreed netting statement with the reconciliation, so that each payment can be traced to the balances it settled in the group's records.

## A small example

Palmridge owes Zenvara AED 368,450. Zenvara owes Palmridge AED 100,000 for software. Netted, Palmridge makes one payment of AED 268,450.