Take Your Intercompany “Beyond Zero” with Improved Operational Efficiency

Often overlooked, significant operational inefficiencies in multinationals stem from manual, unsystematic processes that are related to intercompany. These processes cover many departments across the Office of the CFO, from Accounting and Tax to Treasury and FP&A. The inefficiencies from poor intercompany can be substantial. According to leading industry analysts:

• "Intercompany represents the biggest disparity in efficiency between world-class and peer group finance organizations." - William Marchionni, Sr Director, Finance Advisory, The Hackett Group

• "Companies with 1,000 or more employees take seven days or longer to complete their close, and intercompany is a major contributing factor." - Robert Kugel, ISG Research

Intercompany Financial Management (IFM) is a policy, process, and technology-backed approach to addressing intercompany issues. It automates, enforces, and systematizes processes that unlock value by making intercompany operations more efficient. This allows the enterprise to operate better across many functions as the effects ripple across F&A.

Manual processes lead to a web of operational inefficiencies in intercompany operations. These inefficiencies arise when standardized procedures are lacking and no cohesive system is in place to streamline them across the enterprise.

Even worse, these intercompany inefficiencies intensify over time. Understanding what's truly happening when each entity and business unit views intercompany operations through its lens becomes overwhelming. Even the most sophisticated processes are time-consuming and expensive to fix when issues arise. As a result, accounting, finance, tax, and treasury teams often spend more time putting out fires than focusing on strategic business management.

Finance is unduly burdened with compliance and continuous last-minute problem-solving, always under the pressure of a looming monthly, quarterly, or annual close.

Intercompany services provided within an enterprise, such as R&D project hours, expat charges, or IT billing, are prevalent intercompany transactions that are notoriously challenging to manage. They lack common data structures similar to other transactions processed through an ERP.

Intercompany Trade (Goods) transactions are no easier. Across a multi-ERP environment, tracking both the buy and sell side details of transactions can be laborious, with teams trying to manage and resolve exceptions and disputes while completing reconciliations in a timely manner.  

With an accounting talent shortage, holding onto prime talent is key. Top performers expect to use their talents to the fullest. Manually managing intercompany processes is time-consuming and not a good use of your team's time or capacity. This reality makes it a prime area for dedicated technology to perform, freeing talent to take on key challenges and keeping their work interesting.

While policies and processes are essential to sound intercompany, having dedicated technology to address its associated challenges is critical. A dedicated intercompany solution does three things: organizes, automates, and rationally enforces intercompany transactions.

Businesses must be capable of organizing and cataloging intercompany billing, with visibility on the buyer and seller sides of the transactions. Such systematization drives rigor across every unit entity and function impacted by intercompany.

An intercompany solution must automate processes so they are error-free, transferable without quality erosion, automatic, and compliant. Automated billing routes and tax-compliant invoices are examples of where technology needs to support intercompany.

Technology also needs to enforce transactions to ensure overall integrity. An example is booking two-sided journal entries. Integrating with each entity's respective ledgers ensures that the entries are booked appropriately and removes the need for manual matching. This enforcement eliminates the need for disputes to resolve imbalances from unbooked entries.

Adopting  IFM automates, enforces, and systematizes processes that can unlock value by making intercompany operations more efficient and allowing the enterprise to operate better across many functions while ensuring accurate, efficient, and intelligent financials.

An IFM approach begins by examining all related subprocesses and data sources involved in managing intercompany transactions and utilizing a dedicated technology solution to manage the data and transactions that are part of those processes.

BlackLine has a demonstrated track record of helping teams centralize intercompany operational processes to more efficiently support evolving regulatory requirements and audits with our Intercompany solutions. With Create, our signature solution, customers see efficiency gains with visibility across multiple ERPS, and reductions in days to close by preventing errors before they occur with AI Predictive Guidance.