BlackLine Blog

June 17, 2016

How The Intercompany Hub Makes The World Smaller

Modern Accounting
3 Minute Read

Acuity Magazine

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For today’s business, the challenge of geographical growth is less daunting than ever before. Technology makes setting up a new storefront nearly as easy as putting up a website. Hiring a new sales agent? Due diligence, thanks to social media and the fathomless depth of the Web, takes days rather than months.

For a growing business, the problem isn’t starting up. It’s keeping up – keeping up with growth in sales, growth in partners and new customer types, and, for many, growth in the numbers and types of financial reporting systems.

Today’s technology notwithstanding, many organizations are still hindered by the difficulties of reconciling the financial reporting systems for their various divisions or other entities. They’re forced to rely on spreadsheets, emails, and attachments, any of which can be misread or missed entirely, and on ticking and tying their way through thousands or even hundreds of thousands of records.

Problems with financial reporting can impact the bottom line, of course. But they can also set off issues of confidence and trust that can damage the reputations of the organization and its executives.

A Central Clearinghouse

There’s no single, overnight panacea for issues like these, of course. But a solution that comes close is BlackLine’s Intercompany Hub. The concept is simple. The Hub serves as a central clearinghouse – a kind of honest broker - for intercompany transactions. It keeps data current and accurate through interfaces to the organization’s financial reporting systems, including ERP and non-ERP systems.

A portfolio of templates helps with setup, defining entity relationships, governance guidelines, VAT tax and currency details, validation logic and approval workflows.

Supporting documentation and comments are maintained within the transaction record itself, which eliminates the need for users to spend countless hours hunting down documentation or tracing agreements made over email and phone conversations to substantiate a transaction.

Once underway, the Intercompany Hub lets the accounting team create, post, review, approve and settle intercompany transactions. The Hub automatically creates an audit trail that can be queried from the BlackLine dashboard.

Accounting and finance managers thus gain real-time intelligence into the business by viewing settlement amounts and having access to relevant documentation. This can pay dividends at all levels of the organization. It maximizes accuracy and timeliness of financial reports, and fosters agility and trustworthiness in strategic planning.

New This Year

The Intercompany Hub continues to grow in functionality. An example of new features for 2016:

Bi-lateral netting: This function automatically aggregates all transactions between two entities into a single, netted view. The view can be filtered to reflect net-payables or net-receivables perspectives, taking into account net eligibility requirements of certain transactions and/or entity relationships. The function simplifies settlement and facilitates management insight into what can be very complex global processes.

Automatic invoicing: For some countries, regulations require invoicing for certain intercompany transactions. The Hub can now automatically generate the invoice and attach it to the transaction record as supporting documentation. This can save substantial time over having to create hundreds of invoices manually.

Bulk certification of intercompany transactions: The preparer can select multiple intercompany transactions to certify at once, and can also have the records automatically certified upon import, with the records automatically passing through the required validation processes. This is an ideal way to speed up the month-end close, when the accounting team has to book large numbers of outstanding intercompany transactions.

Global settlement displays: Users with appropriate access credentials can now view aggregated global transaction value details by toggling to a grid or matrix presentation. The grid features columnar representation of entity relationships and the values of the transactions for each relationship. The matrix shows a two-dimensional relationship, initiator to recipient, with the total value of transactions between those relationships. Both displays permit real-time drill-down to transaction details.

Role-swap capability: Preparers and approvers can swap roles prior to the certification of an intercompany transaction record. The transaction thus becomes a working document that can pass easily between preparer and approver – a benefit in cases where preparers and approvers are unfamiliar with one another’s entities in a multi-entity transaction, and would have to go through a rejection process in order to make modifications.

Making Finance Proactive

“Outside of BlackLine, today’s intercompany reconciliation is mainly a reactive exercise,” says Talia Marino, BlackLine’s product manager for the Intercompany Hub.

“The Intercompany Hub changes that to a proactive model. Agreements are met ahead of time, before anything is booked or hits the general ledger. The intercompany transaction information becomes the data source for the journals that will be booked. That lets us mitigate the kind of timing issues you might see outside of BlackLine, where people can post more or less randomly.”

The proactive nature of the Hub also plays into the finance industry’s move to continuous accounting, says Marino.

“We’re not just reducing risk and eliminating manual errors, but we’re reducing the time and randomness inherent in manual processes. That counts for a lot in any business that wants to grow.”

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