From Panicked to Productive: Intercompany Optimization from the Eyes of a Multinational Insider

A fictional intercompany accountant’s life is transformed when the business makes the move to BlackLine to optimize intercompany processes.

Julio works in Corporate Accounting managing intercompany transactions and eliminations for consolidated reporting at a large, acquisitive multinational corporation that provides financial services. He’s been doing this job for seven years and sometimes wonders how he’s been able to stick with it this long.

The system (or systems) for managing intercompany transactions is disorganized, to say the least. Each region has its own methods for processing transactions, and every time a new entity is acquired, Julio’s team needs to get up to speed on a new system. Meanwhile, Tax goes into a tailspin as it braces to comply with the evolving operating model and jurisdictional regulations.

Much of Julio’s job involves using manual processes. Just to make sure he doesn’t miss anything, he checks and rechecks transactions and then checks them again. It would be one thing if all transactions flowed through corporate, but many pass only between siloed business units, leaving Julio feeling insecure about whether he’s seeing all transactions.

Because the enterprise has expanded quickly over the years, it’s compiled a host of disparate ERP systems and disconnected subledgers. Each close is accompanied by disputes, write-offs, restatements, and tax leakage that Julio believes is excessive.

What makes things especially difficult for Julio is the lack of visibility. He and his team do their best to muddle through this decentralized field of uncertainty, but the truth is, no one feels like they’re as knowledgeable as they should be. They must keep up with different policies and rules governing workflows, authority delegation, trading relationships, and netting and settling. Each region seems to have its own guidelines for determining things like financial statement thresholds, transfer pricing, and restricted currencies. And to make matters worse, the firm is being audited!

There’s been talk about improving things, but so far, those changes haven’t materialized. So, Julio and his team have learned to live with operating in this chaotic environment — one they jokingly refer to as the “intercompany wild, wild west.”

Still, the stress that many of them feel has led Julio and his colleagues to consider quitting to work for a company that has adopted new strategies and technologies and optimized its intercompany processes.

Today, Julio is at work earlier than usual because he knows what’s ahead. With the close only three days away, he and his team have begun the mad dash that happens every quarter (and often every month). He’s anticipating that the next few days will be long and stressful. Get ready for a week of sleepless nights, he thinks, as he starts on his second cup of coffee.

Julio stares at his spreadsheet with the growing list of transaction imbalances. He’ll need to manually research each one to try to determine why they don’t match. Time to go into detective mode and try to figure out why these payments aren’t matching the invoices, he thinks. Who’s not doing their job correctly? Could both parties be at fault? Maybe someone got a purchase order number wrong, or perhaps the two entities hadn’t been clear what transfer pricing they had initially agreed on. Or could the problem be that they’re using two different ERPs that can’t talk to each other?

Julio thinks about the many hours he’ll be putting in trying to resolve messy disputes. I’m not only going to have to play detective, but I’ll also need to be a referee. Even as he anticipates trying to manage these intercompany accounting issues, Julio has something else on his mind: Tomorrow night is his daughter’s school talent show, and he’s worried that he’ll miss it, just as he did last year. Sure, I’ll watch the video with her over the weekend, but it won’t be the same as being there.

Julio has been reviewing a running list of unresolved transactions—the same ones he’s been staring at for more than a week. He’s tried to contact the different entities involved, but most are not returning his emails, and the few that did claim that “the problem isn’t on our end.”

There’s one that’s been especially tricky. It’s an imbalance between the U.S. and U.K. entities. Julio has gone back and forth with both and believes there’s a problem that neither one is seeing. He starts by calling the U.K. subsidiary and explains the mismatch, stressing that they have very little time to figure this out. The U.K. accountant does not take this information well and, with emotion rising in his voice, explains to Julio that this transaction concerns a performance payout, one that could directly impact profit margins. Then Julio hears the dreaded response: “We did everything right. Sorry, we’ll just have to agree to disagree.”

Julio feels his heart start to race. He can already see where this is going. If this doesn’t get resolved before close — and it’s looking very doubtful that it will — this unreconciled transaction will haunt us for weeks, perhaps months. No one has the time to wrestle with this dispute, and the CFO will let me know in no uncertain terms that it’s draining our limited resources. Even worse, it could lead to a restatement, all because two accountants in different countries can’t figure out where the issue is!

Julio’s phone rings. It’s the Controller wanting to know when he’s going to disposition all materially significant imbalances and disputes. The call is not a surprise. Julio has already received calls and emails from Tax, Treasury, and the CFO with the same questions: Will these issues be dispositioned before the close deadline, and will each one be accompanied by supporting documentation to enable resolution and support compliance?

Julio does his best to assure the Controller that he’s been working on this for days and plans on resolving all transactional issues and imbalances, but the Controller is audibly nervous. He starts tossing out words like restatements, write-offs, and tax leakage. After he hangs up the phone, Julio is gripped by a cold reality: The truth is, I actually don’t know that I can do this. Without visibility into different repositories of data, I’m flying blind. Suddenly, Julio begins to feel like his job may no longer be secure. The fallout from this just might be too great.

Julio is so worried that he failed to notice that the CFO has sent him an email. It’s about the audit and what information is being requested. What’s more, it’s got to be in by noon tomorrow. The CFO reminds him that failing the audit can damage the organization’s reputation and even impact the stock price. Julio looks at his transaction list and feels his heart beating faster. This has got to be the worst time to be audited! He tells the CFO that he’ll submit the information as soon as he can.

But then he discovers a problem. He can access the information that’s on his computer, but what’s kept by Germany and China seems to exist in a black hole. Julio sends an email to both regions, knowing that it will be hours before either controller is even awake and able to read it.

Julio takes a break to eat a sandwich. During his brief period of downtime, he thinks about the chaos he and his team navigate every month. The stress, the missed family time, and the huge number of hours spent on menial tasks. As he does at the approach of every close, Julio wonders if it’s time to brush up his resume and start looking for a better opportunity. I just don't know how long I can keep this up. The stress is unbearable. I’d value my work here so much more if I wasn’t always putting out fires and, instead, could focus on important, strategic tasks. The problem is, if I leave, it will just add to the burden of my team members, and I can’t do that to them. 

There’s got to be a better way to manage these transactions, he thinks. So, Julio emails the CFO about the issues he and his team have been wrestling with and suggests that processes be automated, that they gain visibility across the enterprise, and work from a centralized subledger. Then he calls his wife to let her know he’ll be working late tomorrow night and asks her to be sure to record their daughter’s performance in the talent show.

While Julio was struggling to resolve transactions and disputes, manage data for the audit, and wrangle tax information, the enterprise’s leaders were indeed looking into improving the firm’s intercompany accounting processes. What pushed things over the edge was a serious failure in the system. It was discovered that the consolidation team was accidentally processing third-party transactions as intercompany transactions.

Because they weren’t properly eliminating, they were misstating consolidated statements. Fortunately, the anomalies were caught and reported to their financial consultants. But leadership knew that the situation could have been far worse. Auditors could have been the ones to spot the issue, and the organization might have needed to submit restatements that could have been costly and damaged the firm’s reputation. Still, it was a wake-up call that the enterprise urgently needed to optimize its intercompany processes.

The company chose BlackLine Intercompany Solutions to do just that, and in just a short time, the organization was up and running with a host of powerful tools that enabled it to experience numerous benefits, such as:

• Dramatically improved operational efficiency with AI-powered transaction creation

• Centralized processes through a single, virtual intercompany subledger

• Streamlined netting and settlement of intercompany transactions

Today, Julio is chatting with his team. They're having a good laugh because the enterprise just acquired a new entity that has a different accounting system than any of them are used to. They’re chuckling about how stressful this would have been before the organization adopted BlackLine Intercompany Solutions.

“I can’t believe how the solution is able to automatically streamline the new entity’s data through our centralized system and give all of us clear visibility,” says Julio. Another team member remarks that the solution’s built-in tax support automatically adjusts for the new entity’s parameters. Still another expresses surprise at how quickly the audit was wrapped up. “I finally know what it’s like to manage by exception!”

“What I really appreciate,” says Julio, “is that I get time back, so I can spend it in ways that help the company’s ability to gain an edge. And my family is really happy that I’ve been more available for them.”

The group continues their conversation over lunch, which is hosted by the CFO as a thank you for sticking with the company through those tough times. She tells them she’s glad that their jobs have become so much easier.

Julio smiles. He feels appreciated and heard. What’s more, he knows that he’ll be leaving a little before 5 pm that day. His daughter is performing in a music recital, and he’s looking forward to attending it and then taking the family to dinner at his wife’s favorite restaurant.

Does Julio’s situation resonate with your work in finance & accounting? We all deserve a bit of grace, and not having to manually research and examine every irregularity in the financial close process could make a huge difference in your F&A team’s work-life balance and even their quality of life.