Finance has long ignored the barrage of distractions that accompany intercompany accounting. Now, with increasing international trade, mergers and acquisitions, and regulations, it’s no wonder intercompany accounting is now under the spotlight, says BlackLine Director of Product Marketing David Brightman.
“Today’s intercompany transactions form some 80% of global trade. This dwarfs external sales by a factor of 10 or more, and it can create a growing headache for accounting, tax, treasury, and legal teams that rely on manual methods for creating, balancing, and settling the transactions,” Brightman says.
Adding to these challenges are today’s accelerating pace of mergers and acquisitions, and the ongoing creep of financial infrastructure complexity.
According to industry sources, companies spent $44.3 trillion globally on mergers and acquisitions during the first nine months of the year, up 93% from a year earlier.
“Also, financial infrastructures now run across a dense and widespread ecosystem of technologies,” says Brightman. “Over time, the burden from multiple ledgers and chart-of-accounts means that company-to-company transactions are nearly impossible to manage effectively.”
Automating Intercompany Accounting
Bringing automation to intercompany accounting can go a long way to replace distraction and chaos with opportunity, Brightman says.
“Unifying and automating intercompany data flows is a key enabler to efficiently integrating acquisitions—not to mention freeing up cash to make them in the first place.”
The question for many businesses is where to start with intercompany automation. According to Brightman, BlackLine has an answer: three purpose-built leading practice solutions that optimize key intercompany processes, from control-agreement workflows to intercompany invoice balancing and clearing. Here’s a brief description of each one.
This solution automates the initiation, approvals, and bookings of transactions, while enforcing intercompany trading relationships, policies, and transfer pricing. It’s used for booking indirect, service-type transactions, which are typically detail-heavy. When performed manually, they require numerous emails among parties for allocating central amounts or initiating cross-entity financing.
Balance & Resolve
This is designed to eliminate out-of-balance accounts by standardizing and automating the intercompany balancing and issue resolution processes. It helps reduce risk by automatically flagging out-of-balance trading pairs and the underlying transactions that create the variance.
Also, it lets users configure automated or workflow-based resolutions to post adjustments—and notify business users—to bring balances back in line.
Net & Settle
This solution gives accounting and treasury teams real-time visibility on transactions that are open and those that are ready for settling. It facilitates the “final mile” of intercompany accounting by integrating with the organization’s treasury systems to produce cleaner books, reduced exposure, and improved cash management.
Simplifying the Intercompany Accounting Experience
“We see these solutions as part of a guided path to modern intercompany accounting,” Brightman says. “The point is to quicken the time-to-value by letting the customer determine which solution is the best fit given where they feel the most pain in their processes.
“That way, automating intercompany accounting doesn’t have to be like doing a full ERP upgrade. It’s not a Big Bang. Instead, we offer metered, incremental improvements that can add up to a powerful finance transformation—and that can turn intercompany from a chaotic distraction into a lasting competitive advantage.”
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