BlackLine Blog

March 08, 2024

Building Your Own Intercompany Solution: Is it Worth the Risk?

Digital Transformation
4 Minute Read
JT

Jim Tilk

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The Risks of an In-House Intercompany Solution

Developing your own in-house intercompany solution is a tempting prospect. You’ve probably been wanting to optimize and automate your intercompany processes for some time, and you’ve got a big IT department and a capable development team. So, why not avoid paying a third-party software provider and instead develop a new solution under your own roof?

The words “don’t try this at the office” have never been more fitting. Why? Because there’s a lot more to developing an intercompany solution than most people realize.

It would be like trying to build your own house instead of hiring a professional. You might have some of the skills needed, but you’ll likely never have the time, as people tend to greatly underestimate how long such a project will take.

You’ll likely spend every free minute trying to complete the project, and it might never get done. There is a plethora of federal, state, and local regulations you’ll need to learn. It’s easy to go way over budget because you’re buying most of the materials at retail prices, and in the end, you may not be happy with the result because those repurposed materials that weren’t designed for the new structure will compromise the quality of the house for as long as you live in it.

Attempting to build your own intercompany accounting solution would lead to the same kinds of issues. Let’s look at the reasons why.

Intercompany Processes Require a Painful Amount of Planning

The first thing you’ll realize when building an in-house intercompany solution is that the process will take longer than you might imagine … much longer. If you think it can happen within a year, think again. It’s likely going to take years to get to the point where your solution might be able to process some of your intercompany transactions.

The situation would be even more difficult than developing a SaaS product because intercompany development is an enormous, complex beast—one that has lots of moving and expanding parts—which means the risks of trying your hand at in-house development would lead to exponential risks. 

That’s partly because no matter how skilled or experienced your developers are, you’ll need to hire and train teams of specialists who are experienced with intercompany accounting software. This includes software engineers, product managers, business analysts, accountants, and intercompany tax consultants. You’ll have to manage these teams and be able to replace someone who drops out because any delay in planning means a delay in building and implementing the software … so be ready to greatly expand your FTE headcount.

Building Intercompany & Establishing Processes

You should also plan for your build and implementation phases to take a long time. During this long build cycle, businesses often will find their financial models and regional compliance requirements changing. For example, a business acquisition during this period will introduce new legal entity structures, tax implications, and ERP integrations. An intercompany software solution that is not fully configurable will suffer from major delays.

If any part of the process could be put on pause, it would give you time to focus on the build - but that’s not how intercompany works. Remember, while you’re trying to get your build done and implemented, you still have a business to run. That means continuing to balance out transactions, close on time, resolve disputes, and comply with tax regulations using the same manual processes that motivated you to optimize your system to begin with.

The Hard Truth About Tax Compliance

If the issues raised at this point haven’t turned you off from trying to develop an intercompany solution in-house, then the tax dilemmas will. There isn’t a multinational company that doesn’t appreciate how complex and dynamic the regulatory tax world is.

Not only are regulations changing, but every time your firm merges or acquires an entity, there’s a new universe of tax regulations you need to be ready to comply with. That means you’ll need to find compliance experts for every country you do business in, and if you expand into a new market, you’ll need to expand the team yet again. 

The cost to hire these teams is enormous and even then, the job of consultants is limited to explaining only legal requirements. They can’t, for example, review each tax requirement, weigh it against your operational concerns, and make cost-risk-benefit decisions for your business. The outcome would be over-engineered, cumbersome, and financially insufficient.

Ongoing “Forever” Costs

Even after a build is completed and implemented, you’d be incurring numerous ongoing costs. Just as with any software product, there are hosting, licensing, development tools, and engineering teams to fund.

These costs only go up as the enterprise changes processes and scope. Examples could include acquiring an accounting system that teams are unfamiliar with or a new entity coming online whose invoices need to be submitted using processes your teams aren’t used to. Those kinds of changes can throw your operation, budget, and schedule into a tailspin.

Meanwhile, you risk transactions being out of balance, data being unreliable, disputes taking too much time, and tax leakage getting out of control. At this point, you would have come too far to shift to a different solution, having become a victim of the “lost cost fallacy,” so you’d likely be stuck with a high-cost, low-performing solution for a long time.

A Better Path Toward Intercompany Optimization

Partnering with a third-party intercompany solutions expert is a better way to improve intercompany processes. BlackLine’s Intercompany solution is ready to go and designed to optimize intercompany processes from the ground up, so you’ll be up and running in about six months.

The upfront cost of purchasing a BlackLine intercompany solution will save your teams countless hours—which will translate to significant cost savings—and you’ll end up with a much better-performing product.

Here are some of the reasons why:

  • BlackLine’s intercompany solutions are built and continually improved by teams of top-tier intercompany and tax specialists.

  • Our solutions have best practices and proven strategies baked in, so any issues have already been discovered and addressed, leaving your teams free to manage by exception and gain time to devote to meaningful, strategic tasks.

  • You get a vetted, validated solution that’s able to measure success equally, fairly, and accurately with a combination of objective and subjective metrics.

  • The solution consolidates data through a centralized system, no matter where the data is coming from, even if generated from a slew of disconnected ERPs that just came online.

  • Your organization will remain compliant with regulations such as SOX, CCPA, and GDPR, and periodic audits through continuous operational oversight.

  • Technical considerations such as data encryption, network firewalls, intrusion detection and reporting, and logging are included in the solution.

  • Compliance is included. Our solution is developed and updated with top-notch tax compliance specialists, and that know-how is coded into our solution, so no matter how fluid regulations are, or what regulations a new entity’s country is requiring, the solution adjusts automatically.

  • Our solution is flexible and scalable, so it’s able to shift and grow with your enterprise. No specialized FTEs are needed to adapt to data quality concerns, accounting changes, tax compliance, and changes in business needs.

Planning for Intercompany Success

Like hiring a qualified, trustworthy builder to construct your home, you get what you need from day one by turning to an intercompany solution partner like BlackLine. What’s more, the bigger and more acquisitive your enterprise is, the greater the time and cost savings will be.

BlackLine Intercompany

Structure and automate intercompany transactions to maximize operational efficiency while improving deductibility and reducing tax leakage.

Learn more

About the Author

JT

Jim Tilk