Businesses have learned plenty over the past months as they’ve navigated the pandemic, and that may not be such a bad thing. One of the key takeaways is that it’s possible, and can even be profitable, to maintain a remote workforce.
Companies can reduce office costs and workers can save travel time. In the example of the virtual accounting model, finance professionals can work the hours that suit them best, since their work—and their home offices—are accessible in the cloud.
Even companies with complex organizational charts can benefit from multi-entity, multi-continent virtual accounting, thanks to BlackLine’s Intercompany Hub (ICH).
In effect, ICH removes the barriers of complex currency interactions by automating and centralizing oversight of large volumes of transactions. This is a blessing for those that are used to wading through organizational layers, like tax, treasury, and legal, to manage their downstream intercompany processes.
Taking a Preventive vs. Reactive Approach
As an example, ICH differs from older, traditional styles of intercompany accounting by working proactively at the transactional level, rather than reactively, with a needle-in-the-haystack approach.
The traditional approach of using spreadsheets and multiple systems for data aggregation results in inadequate controls does not provide the proper controls or details to address the complex nature of intercompany sales and purchases, services, loans, interest, and other payments. Traditional approaches mainly focus on the month-end balancing process, which is only the tip of the iceberg.
“This is a reactive and time-consuming process,” says Gary Carpenter, BlackLine’s director of value architecture. “So, what a lot of companies do is apply reconciliation plugs for temporary help and then roll the balances forward. These transactions often do not face the same level of scrutiny as third-party transactions since they are between related entities. This can be a costly mistake.”
“There are serious tax and regulatory implications associated with intercompany processing,” he says. “That’s because as people transfer assets, services, and so on around the world, they’re dealing with inconsistent and confusing rules, because the different countries want to be sure they’re getting their fair share of taxes. So there can be a high cost of compliance and serious tax penalties.”
BlackLine’s ICH avoids this by operating in a peer-to-peer fashion. BlackLine automates the transfers as they happen, providing full visibility to related offices that show the transactional data and the various workflows. Since this data is shared as the transactions occur, the entities can monitor and manage the process throughout the period.
“They don’t have to wait for the end of the month,” Carpenter says. “ICH works preventively to find anomalies, so it relieves much of the pressure accountants face during the close. It also helps companies avoid tax penalties and other regulatory problems.”
A Virtual Platform
“With BlackLine’s Intercompany Hub, we’ve virtualized the intercompany marketplace,” says David Brightman, BlackLine’s director of product marketing. “Think about a company with operations around the world, with many complex transactions taking place among internal teams. This is no place for manual processes. What’s needed is strong governance.”
“ICH brings people together—including local accounting, tax, treasury, and legal—even though they may be physically apart. Now they’re interacting in real time, and ICH has taken the hassle out completely.”
Read our new issue of BlackLine Quarterly for more stories like this, including:
- Accounting with a Distributed Workforce: How to Make it Work
- BlackLine’ Speeds Time to Value with New Use Case Solutions
- Fast-Tracking to an Automated Close with BlackLine’s Modern Accounting Playbook