BlackLine Blog

October 06, 2022

Go Beyond Zero by Driving Margin Improvements

Modern Accounting
3 Minute Read

Adam Laura

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In part one of this series, we discussed improving operational efficiencies in regards to intercompany processes. In part two, we learned how to go beyond zero by intelligently managing global tax processes. Part three will discuss driving margin improvements.

Intercompany & Margin Improvements

A ‘good’ approach to managing intercompany operations will result in some productivity and efficiency gains. But a ‘great’ intercompany operation creates pathways for new opportunities for growth, best-in-class performance, and continuous margin improvements.

Driving margin improvements goes back to a core purpose of any business—delivering shareholder value. All businesses must constantly find pockets of optimization to tune-up in order to make the engine run better. Often overlooked, intercompany operations in multinational corporations are rich with opportunities for optimization that positively impact margin.

Improved Operational Productivity

When an enterprise seeks to make margin improvements at scale, they can do it in three ways:

1.    People

2.    Processes

3.    Technology

Improving intercompany operations is no different. Most often, the best solutions come from a combination of all three. However, processes and technology are the key drivers of margin improvements for the fundamental reason that they drive higher productivity and better margin improvements than adding staff.

Adding more people often adds more cost than changing processes. Investing in technology can bring some quick-win improvements (such as more accurate transfer pricing) while proving out ROI over time and establishing automation that continues to deliver dividends over time.

With BlackLine Intercompany, technology-supported process improvement delivers operational efficiencies across the enterprise. These represent a significant savings over time by reducing manual processes and by systematizing, automating, and enforcing intercompany processes.

Strategies for Tax Savings

When looking for ways to improve margins, it’s sensible to examine the largest buckets of cost because they often contain the largest potential savings. Intercompany accounting has come under increasing scrutiny by tax authorities globally and will require even more attention as countries establish and expand e-invoicing requirements. Improving intercompany operations is an imperative that will drive margin improvements now and as intercompany tax topics receive even more attention from countries anxious to increase tax revenue.

BlackLine’s built-in and constantly updated library of tax solutions enables efficient tax-driven margin improvements and propagates tax considerations across the enterprise. BlackLine Intercompany enables you to find and display your transactional data easily from wherever it originates within the enterprise. It is uniquely configured to analyze transactional trends and tax treatments for various types of charges. This generates data that can be used to identify tax and operational risks or operational efficiency opportunities to improve upon.

BlackLine Intercompany can also help discern transaction patterns, easily find links between buyer and seller units across the enterprise, find tax leakage to plug, and spot tax issues that could cause problems in any jurisdiction in which the enterprise has a presence.

Achieving Best-in-Class Competence & Processes

Reputational capital, partnerships, relationships with talent, and relationships with customers all depend on best-in-class competence. A great intercompany solution allows you to not only become more efficient at the bottom line, but gives you efficiencies of process and at-the-ready information to better manage reputation and relationships.

Data for Continual Margin Improvement

Beyond tuning your processes and getting your house in order, executives need access to readily available, relevant data coming out of those newly optimized processes and automations to further evolve the processes.

Best-in-class performance is not a one-and-done scenario. It’s a continuous evolution based on solid processes and easy access to relevant data. For example: allocating central IT services costs and handling intercompany chargebacks. With the right data and process, it becomes easier to assign costs to product lines. Without this, financial performance at the business unit level will suffer due to inaccurate unit costing, product costing, and margin analysis.

Realizing Intercompany Margin Improvements

Upping your intercompany financial management (IFM) game delivers outcomes that are worthy of the effort. Get started by identifying known goals and macro topics such as inflation, price erosion, or changing tax policy, and then examining how you can offset these challenges. Look for operational productivity that you can achieve through doing things differently, better, and in a more automated fashion.

With BlackLine Intercompany, you have new ways of seeing into intercompany data, structured in easily accessed ways. The advantage of these newly optimized processes allows you to apply many different nuanced lenses across different parts of the business to tweak things. Moreover, you’ll find new opportunities, new problems to solve, and continually evolve and improve the enterprise.

Get your copy of this exclusive survey that examines essential questions about the state of intercompany at multinational companies.

Adam Laura is the Chief of Staff, Intercompany, at BlackLine.

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Adam Laura