4 minute read
August 15, 2022
4 minute read
How treasury can ensure a company’s legal entities have adequate cash flow and liquidity through an automated intercompany infrastructure.
The world of business is currently evolving at such a rapid pace that legacy systems simply cannot keep up. At the same time, treasury, like most departments within a multinational corporation, is being continually challenged to do more work with fewer people. To stay ahead of the game, treasury needs a solid, automated intercompany infrastructure.
To better understand the benefits of an automated intercompany infrastructure for treasury, it's worth taking a moment to briefly examine the big picture impacts of technology on treasury’s key challenges.
One of the treasury department’s biggest hurdles right now involves the (in)ability to foresee market developments, such as interest rate fluctuations or foreign exchange devaluations in certain countries. Treasury needs technology that allows it to predict events like these.
Technology also plays a key role in managing another of treasury’s key hurdles—satisfying the needs of the modern workforce. Younger employees seek faster growing career paths. They can readily move to other companies because their hands are not necessarily tied by pensions, which are no longer provided by most companies as they were in the past.
Armed with the right tools, you’re better able to give these younger employees what they want. You can retain them longer and make them more productive. This is because automation positively affects culture. By empowering employees in treasury and elsewhere with technology that makes their jobs easier and more rewarding, you put them in a position to be successful. You allow them to feel like they are making a difference.
To facilitate the intercompany exchange of goods and services within a parent company, you need to make sure that all the legal entities of a company have adequate cash flow and liquidity. To do this requires a solid intercompany billing system—one where you can invoice between legal entities with the appropriate tax guidance and application on those invoices. Then you can settle the invoices on an internal billing system or platform that is both prompt and efficient.
A solid intercompany system would eliminate most of the re-work caused by invoicing problems. It would eliminate manual or other types of invoicing errors and tax errors where tax is applied incorrectly in different countries. This is especially important because tax errors can wreak havoc on a company's reputation. If your credibility in the marketplace is tarnished, it can take a long time to repair. So, a good intercompany system is required to help keep a company out of trouble.
A significant part of what treasury manages is liquidity, and intercompany is, on average, close to 50% of a company’s total liquidity.
This is something you can control by putting good systems in place. If you do a good job of setting up and using the right type of vendor payment and invoicing processes, you can drive a lot of your efficiency.
Ample liquidity allows companies to finance new technologies being developed within the company, which leads to new products, new sales and leads, and ultimately new revenue and income. Improved cash flow and liquidity also allows companies with debt to pay down their debt more aggressively and reduce interest expense. Liquidity also helps companies acquire other entities because they have the cash flow to support those acquisitions.
Without state-of-the-art technology and automation, treasury must rely on an increased headcount and pay the associated cost. There’s also a lot of manual re-work and a general reliance on cumbersome spreadsheets.
BlackLine empowers the treasury function with reliable intercompany financial management. It allows you to efficiently pay your bills and invoice your intercompany customers. Most importantly, it interacts easily with most treasury management systems as well as general ledger systems.
Treasury has a lot of interaction with tax, and the tax functions are critical to the success of a treasury department as well as a tax department. BlackLine provides the general ledger entries directly into multiple types of third-party general ledger systems. It does so in an error-free and consistent fashion. It helps eliminate tax errors, keeps the company out of trouble, and frees up more time for the treasury team to take on more productive tasks.
With the automation introduced by BlackLine, jobs in treasury are more rewarding. Professionals can focus on doing things they love while adding value to the company instead of spending time doing mostly manual work that’s not interesting.
Being more efficient and doing more with smaller teams is a key goal that treasury departments and other functions in companies share. BlackLine allows corporations to accomplish that.
Get your copy of this eBook that discusses a new way to tackle intercompany: intercompany financial management (IFM).
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