Even when done correctly—that is, with efficiency, transparency, and accuracy—tracking, managing, and reporting on intercompany accounting (IC) transactions is complex.
Yet for most companies, it is a complicated, convoluted rat’s nest of unmatched transactions, manual reporting processes, and after-the-fact corrections.
Deloitte found that 54% of respondents still use manual intercompany processing, 47% have only ad hoc netting capabilities, and 30% report significant out-of-balance positions.
Why don’t traditional intercompany accounting processes deliver the results, efficiency, and transparency organizations need?
Too Much Data
It’s a fact of doing business in the 21st century: to grow is to survive. Yet while growth enables organizations to remain competitive, it also generates gargantuan amounts of data—new and ever-increasing information that must be aggregated, tracked, processed, and analyzed.
Too Many Paper-Based And/Or Disparate Software Systems
With this exponential increase in data comes the need to scale existing accounting processes. But for many multi-entity organizations, the ability to scale efficiently never transcends the realm of wishful thinking.
Not Enough Standardization
Multiple entities require teams of employees managing reconciliations, transaction matching, journal entries, and more. Yet these employees don’t work in the same finance office, the same building, or even the same country.
Tasks may be handled differently from location to location, and ownership is either not clearly defined or continuously shifting.
Transforming Traditional Intercompany Accounting
While many multi-entity companies are still struggling with the monstrous mess of traditional intercompany accounting, a few have discovered the secret to doing it right.
These forward-thinking—and acting—companies are already establishing new processes that improve visibility, accuracy, integrity, and efficiency.
They’re also creating systems that bring processes, people, and technology together to ensure a streamlined, standardized, highly accurate IC experience across all entities.
How have these vanguard companies managed to transform their IC processes when, according to Deloitte, 54% of companies still rely on manual intercompany processing?
- By acknowledging the futility of manual, paper-based processes and transitioning to robotic process automation (RPA)
- By recognizing the inherent danger of a monthly close and adopting a practice of Continuous Accounting
- By eliminating siloed processes and disparate software systems and instead standardizing and streamlining workflows and processes under a centralized location
Cleaning up the intercompany accounting mess also requires the use of a centralized hub—a single location for the processing and management of all intercompany transactions.
The IC hub imports data from multiple ERPs and GL systems into a cloud-based repository where transactions are initiated, approved, validated, and booked. It enables the creation and use of global rules for processes, ensures consistent and standardized automation of tasks, streamlines workflows, and enables real-time visibility and reporting.
Read this ebook to learn more about how your organization can transform intercompany accounting and begin realizing these results.