Achieving Intercompany Excellence Amid Macroeconomic Uncertainty

Intercompany finance leaders are well aware of the intense economic headwinds they must consider every day, from increasing costs due to inflation to increasing tax scrutiny to the threat of recession lurking around the corner.

The labor shortage crisis has hit the finance function especially hard. Approximately half of finance activity jobs in the US are unfilled and intercompany posts have notoriously high turnover rates.

That’s why CFOs and CAOs worldwide are committed to adopting technological solutions designed to streamline intercompany operations and optimize them for efficiency so they can strengthen resilience to headwinds. In fact, nearly all respondents (99%) in a recent Accenture survey said they believe it’s important to have real-time processes and operations in place to inform better business decisions.

The payoff? According to a vast majority of those respondents (68%), moving in this direction will help them face uncertainty with confidence by enabling better business decisions related to:

Optimizing inventory and cash flow

• Forecasting more accurately

• Having a better view of working capital

• Supporting integrated planning across the business with self-service access to financial data

But what does this digital transformation journey look like as finance leaders develop their 2023 business plans? How can they strategize for intercompany excellence amid such macroeconomic uncertainty?

Finance leaders can begin the path toward intercompany excellence by examining how other multinationals are succeeding by implementing strategies that embody Intercompany Finance Management (IFM). IFM practices address intercompany in a holistic way, taking advantage of solutions that improve efficiencies and centralize and automate data processes in all intercompany functions, including accounting, tax, and treasury.

This movement is reflected in a recent Deloitte survey of finance and accounting professionals. The survey showed that:

• 39.8% reported that their organizations use emerging technology for intercompany accounting in some capacity throughout their enterprise

• 40.6% said their organizations will increase the time and effort put into intercompany accounting management

• 63.7% reported that their organization has an intercompany accounting program to manage transactions that occur within their organizations’ business units, geographies, and legal entities

• 49.2% indicate that those programs are organization-wide

The challenges posed by economic headwinds are compounded by the fact that many multinationals work with manual processes and struggle to manually rationalize data from disconnected ERP systems. This wastes time and limits visibility.

Such opacity leads to serious problems throughout the intercompany ecosystem including:

• Poor forecasting

• Tax leakage

• Entity-to-entity conflicts

• Supply chain issue paralysis

• Suboptimal cash utilization

• Accounting team burnout

While many multinationals are adopting IFM practices and related best-of-breed intercompany technologies, these changes aren’t happening as quickly as needed throughout the industry. In the Accenture survey, only 16% reported that at least 80% of their finance processes are operating in real-time.

The Deloitte survey showed similar delays, with 20.2% of organizations still not using emerging technologies, such as analytics and automation, and close to 25% reporting that technology, including disparate and decentralized systems, was the greatest challenge to managing intercompany accounting.

A failure to implement IFM advancements jeopardizes decision intelligence while having to pull data from disparate ERPs and other disconnected systems creates bottlenecks and delays an organization’s ability to close quickly. These issues spill into FP&A and tax functions because companies that can’t trust their own data end up overcompensating by conserving cash or paying more in taxes than they should. Meanwhile, treasury is unable to foresee market developments, such as interest rate fluctuations or foreign exchange devaluations.

The impetus to invest in solutions designed to improve intercompany processes is driven by the urgent need to become resilient to economic headwinds and a realization that current, conventional processes are putting some multinationals further and further behind.

It’s critical that CFOs and CAOs put in place strategies that produce more timely, frequent actuals, so that intercompany produces accurate monthly financial statements for trade and non-trade activities and serves an enterprise’s broader digital transformation agenda, instead of hindering it.

IFM helps businesses overcome the macroeconomic challenges that plague multinationals, allowing them to have confidence that accounting teams are working with accurate data and improving all functions that rely on intercompany vigor, including accounting, tax compliance, and treasury. But the benefits extend beyond those processes, as they bolster enterprises’ ability to maintain a top-tier workforce and improve profit margins and scalability.