Redefining Intercompany for the Next Era of Finance

Let’s face it. Intercompany processes are an inescapable responsibility for how global businesses operate. Strategic growth and supply chain adjustments can lead to significant compliance, operational, and financial risks if mismanaged. Yet intercompany transactions are often overlooked until well after they create friction, delay reporting, or trigger compliance risks.

As organizations scale, intercompany transactions grow in both volume and complexity, involving functions and teams from across the business. These processes often rely on skilled finance talent to manually record transactions, reconcile imbalances, and consolidate balances—work that diverts attention from more strategic priorities. Yet for many, intercompany remains a capacity drain, tangled in disconnected systems, inconsistent processes, and manual workarounds that impact both the top and bottom line.

Why does something so fundamental to your ability to report complete, accurate, and compliant financial results get treated like an afterthought, held together by spreadsheets, emails, and manual workarounds? 

It doesn’t have to be this way. At its core, intercompany is a data problem, one that manual effort won’t solve, and ERPs weren’t designed to completely tackle. Addressing your intercompany process with the right approach and dedicated technology reduces risk, frees up capacity, and gives Finance the visibility and control it needs to support the business with confidence.

Integral to the broader record-to-report process, traditional intercompany activities are often highly manual, from transaction initiation to elimination, introducing inefficiency and risk across financial operations. These critical activities also span the entire organization, from individual entities to the group level, and touch core functions including Accounting, Finance, Tax, Treasury, and shared service teams.

While the specific systems and workflows may vary, the intercompany process follows a similar pattern across most organizations, moving through four key stages:

1. Recording Transactions: Operations generate the invoices with trading partner and tax considerations in mind, while local accounting teams are responsible for accurately booking intercompany payables and receivables in their respective systems of record.

2. Reconciling Balances: At period end, accountants reconcile intercompany balances between entities, resolving mismatches that would otherwise prevent elimination. When disagreements occur, disputes are raised to sort out the mess.

3. Elimination: Group finance teams eliminate intercompany balances during consolidation to ensure accurate and compliant financial statements. Unmatched transactions may fail to eliminate properly, leading to reporting errors or, in some cases, write-offs.

4. Reporting: Once eliminations are complete, finance teams can finalize and publish consolidated financial statements.

Let’s look at an example and dissect these four stages to understand the level of complexity.

Imagine an organization with 50 entities across 20 countries.

As an example, a U.S. entity produces widgets needed by its German counterpart. They establish a purchase agreement and execute a transaction. Each must record revenue and expense in their respective ledgers. Ideally, amounts, dates, cost centers, and tax treatments would align, but in practice, they often don’t. The U.S. team books the transaction in dollars on the first of the month, while the German team records it in euros mid-month, using a different exchange rate and cost center.

At month-end, both teams must reconcile discrepancies—reviewing contracts, meeting to align on discrepancies and disputes, and posting adjustments. But mismatches can often go unnoticed or unresolved until consolidation.

That’s when Group Finance steps in. Unmatched entries disrupt eliminations, impact the balance sheet, and delay the close. The group team chases local teams for answers, increasing audit and compliance risks, sometimes even translating foreign contracts and mediating conversations to settle disputes between entities. If FX is involved, Treasury could be holding out contracts until transactions are settled, restricting cash flow and impacting forecasting decisions.

Now multiply this by thousands of transactions a month, across currencies, tax rules, and ERP systems, and it’s clear: intercompany isn’t just a back-office issue.

The challenge is twofold.

Disparate data sources such as multiple systems and ERPs and poor visibility inherently slow down the process.

The siloed nature of multi-entity businesses, including both the expansive reach across the organization and various teams that are involved at different points of the process, leads to a breakdown in communications. Activities are often completed in the scope of the immediate need, booking transactions and eliminating balances by their respective teams. Taken together, this lack of governance around the intercompany process significantly increases risk, which can lead to material weaknesses or even financial restatements.  

Teams should not be spending valuable time hand-holding intercompany activities between chasing data, aligning records, and resolving mismatches that should have been prevented in the first place. 

BlackLine addresses intercompany across record-to-report with end-to-end solutions for intercompany management, from transaction initiation, to balancing and resolution, to the generation of group-level financial statements. It centralizes, controls, and automates key intercompany activities, driving accuracy and eliminating imbalances, so you can close faster and consolidate and report on your financial performance. It eliminates manual effort across reviewing agreements, posting transactions, reconciling imbalances, and eliminating intercompany transactions during consolidation.

To illustrate, let’s go back to our same organization with 50 entities across 20 countries.

During the close, any mismatches are automatically flagged. A workflow routes those items to the right teams for resolution. Adjustments are validated and posted with full traceability. At consolidation, intercompany transactions are automatically eliminated, and balances are automatically translated to the correct reporting currencies using pre-defined rules, eliminating any last-minute scrambling or manual intervention. Entity and group-level teams can now focus on understanding financial drivers and trends, rather than manually reviewing, resolving, and eliminating intercompany transactions.

BlackLine has solutions for the entire intercompany transaction lifecycle. Here’s how they work.

• Create: Seamlessly integrates with ERPs to consolidate transaction data and provide real time insights.  Ensure transactions are initiated and booked with consistent terms, pricing, tax determination, and documentation, removing the need for emails and spreadsheets. Leverage Automated Intercompany Transactions (AIT) to automate and schedule routine transactions (e.g., allocations, cross-charges), leverage advanced calculations with automatically refreshed data sources (e.g., cost drivers for allocations), and utilize dynamic workflow rules to enhance efficiency.

• Balance & Resolve: Using a global subledger, quickly match and reconcile intercompany transactions while ensuring correct transaction pointing and limiting imbalance surprises. Discrepancies are flagged early and resolved through built-in workflows that facilitate review and adjustments between entity teams before they delay the close.

• Net & Settle: Integrates with Treasury Management systems to aggregate, net, and settle transactions across entities and currencies. Free up working capital, streamline payments, and lower FX risk, with full transparency and audit control.

• Consolidation: Intercompany eliminations are integrated and automated in BlackLine’s consolidation engine, accelerating group-level financials while ensuring accuracy of financials and a clean audit trail.

• Reporting & Analysis: Generate real-time, group-level financial statements with the ability to quickly drill down back to the underlying transactions to identify drivers impacting your story. Leverage AI to summarize insights and surface the story behind your financials.

Using BlackLine, teams now spend their time analyzing performance, not chasing intercompany discrepancies.

Want a real-life example? Read how Kraft Heinz reduced their intercompany imbalances to zero.

Intercompany should be a process defined by accuracy, efficiency, and intelligence, not chaos and resource drain.

BlackLine’s future-ready, end-to-end solutions across record-to-report centralize and streamline intercompany accounting processes from transaction initiation through to consolidation. By eliminating silos, automating processes, and embedding control, BlackLine empowers organizations to close faster, report with confidence, and shift resources toward more strategic priorities.