BlackLine Blog

January 15, 2019

The Ultimate Intercompany Solution for SAP Users

Modern Accounting
3 Minute Read

Michael Gilmartin

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How often do you speak with an accounting colleague who has their organization’s intercompany accounting process locked down, netting to zero every month?

Over the years, we’ve worked with thousands of companies to analyze their intercompany challenges and find the right solution. And we’ve discovered that intercompany accounting is a common challenge across the board—regardless of industry, company size, and region.

In a large company, there can be hundreds or even thousands of entities, which lead to a large number of relationships that can turn into millions of different types of transactions between the companies.

Some of those transactions are automated within the ERP through a purchase process, often through procurement or purchase orders. Others are posted manually by accountants who must come to agreements between entities in order to post charges.

The Manual Intercompany Mess

The manual entries aren’t always booked correctly, for a number of different reasons. They’re often booked in different currencies, the amounts don’t tie out, the wrong accounting information is used on one side, or taxes and markups are calculated incorrectly.

Additionally, while two companies might agree to post something through a manual process, one of those entities might not post anything due to lack of automation and proper tracking mechanisms. Also, one of the issues that organizations face, especially in a multi-ERP environment, is a lack of visibility into the issues that are happening throughout the period.

So, if an intercompany transaction was initiated in the middle of the month and booked by one company and not the other, or booked incorrectly, it’s highly possible that no one is aware until consolidation occurs.

As a result, an issue that happened two weeks ago might not be captured until the close process. This leads to accountants working around the clock, trying to fix these issues along with all of the other standard close process tasks.

An End-to-End Intercompany Solution

Intercompany accounting should always net to zero, but many of the larger companies just don’t get there. Instead, they wind up plugging in a number to suspend the unknown difference on the balance sheet, kicking the can down the road until they have to deal with it again next month.

This presents a new set of issues during the next month-end close, and a greater level of risk as the problem continues to accumulate and become more complex month after month.

We’ve worked with our customers to develop a holistic, end-to-end solution for intercompany accounting. This is helping organizations become more proactive in resolving intercompany differences, because it controls the transactions on the front end of the process.

BlackLine’s dedicated solution provides a workflow that ensures intercompany transactions are created in a controlled manner, and posted correctly the first time. Within this platform, two entities can interact, make requests, and enter information related to charges they want to make to another entity.  Subsequently, corresponding entries are created and automatically posted upon final agreement between the entities.

This significantly reduces the number of exceptions and removes much of the human element—and therefore, the human error. Entities are guided through a process that guarantees they’ll come to an agreement and create the correct journal entries. They’re posted in the ERP with the correct amounts, the correct currencies, and the correct accounting information.

Reconcile Intercompany Before You Consolidate

If your organization has multiple ERP systems, BlackLine can initiate entries to both of those systems simultaneously to ensure they’re booked. This eliminates a lot of the issues you may have on the backend.

Additionally, you can use completely configurable invoice templates to satisfy local reporting requirements and send those to the different entities.

When other transactions that are not initiated in BlackLine are entered, they’re run through transaction matching rules. Exceptions are highlighted for users throughout the period, in real-time—not just during the close. This highlights errors as they occur and enables companies to get intercompany under control and reconciled prior to consolidation, which is a big step forward.

Just think about what would change if you could reconcile intercompany before you consolidate. By implementing BlackLine’s Intercompany Hub, you can eventually get there many companies.

How Intercompany Hub Benefits SAP Users

SAP’s Central Finance consolidates information from disparate ERPs at a transactional level. This gives companies visibility into intercompany accounting closer to real time throughout the period, at a legal entity level.

BlackLine complements Central Finance by providing visibility at a transactional level, allowing teams to apply transaction matching rules to get down to the real exceptions that are creating a problem. Intercompany Hub also delivers a more proactive, upfront approach to controlling transactions as they’re being created.

For SAP users within large organizations that have disparate ERP systems, the combination of Central Finance and BlackLine delivers the perfect solution. BlackLine provides control over transactions that are created in feeder systems, ensuring that information in Central Finance is accurate and the close process runs more efficiently.

Read this blog for five proven ways to improve your organization’s intercompany reconciliation.

About the Author


Michael Gilmartin