Are Process Changes Alone Enough to Get Control of Intercompany Chaos?

Many organizations think of intercompany only as left pocket/right pocket. When things get out of balance, the first thing to examine is the process. Is it broken? Is there a better way? While process changes alone can and do help intercompany, it’s not the cure-all.

With the publishing of a recent report by Gartner, we believe there is now no question as to the changes multinational corporations need to make to improve efficiency and save time and cost in their intercompany accounting operations.

“Many organizations have either poor or no technology to manage intercompany processes, so they attempt to resolve issues through ad hoc process changes alone,”¹ states Gartner² in its report, Technology Approaches to Unify Intercompany Accounting.³ Gartner adds, “Process changes alone will not yield sufficient improvement.”³

The challenges are simply too costly to ignore. Trying to manage a non-automated intercompany ecosystem puts an enormous burden on staff and significantly inflates risk. Trying to get by with the status quo, legacy systems simply won’t move the intercompany needle.

“Corporate controllers can achieve modest gains via disjointed process improvements but should pursue fit-for-purpose technology solutions to deliver optimal outcomes,”⁴ says Gartner.

Multinationals have been struggling for years trying to make do with their current ERP and manual-based intercompany systems.

It’s not working.

Intercompany accounting is already a profoundly complex undertaking—and for many organizations, intercompany transaction volumes are higher than those for corporate revenue—so the time-consuming nature of wrestling with manual processes adds to the challenges and negative outcomes.

Multinationals that continue trying to get by using manual, siloed, legacy systems can no longer put off adopting an automated, scalable solution. Businesses that lack the technology necessary to efficiently manage intercompany processes experience issues such as:

• Chronic transactional unreconciled imbalances

• Delays in close and reporting

• Inaccurate financial statements

• Monetary write-offs

• Regulatory noncompliance

• Missed tax deduction opportunities

• Difficulty in retaining talent 

According to Gartner, “Without addressing a scalable intercompany process that includes technology, organizations will struggle and continue to negatively impact business outcomes. This can lead to business uncertainty and increased risk of investigations by revenue authorities, auditors, missed tax deduction opportunities, and unreconciled balances.”

When a multinational optimizes its intercompany processes—especially when it adopts intercompany accounting software—it gains unprecedented control over the entire ecosystem.

Teams work from a centralized repository for documentation, invoices, and postings. Workflows are standardized and have stronger controls, and transactions are posted in real-time. Netting and settling are headache-free, and cost and tax allocation require no manual intervention. What’s more, all stakeholders can enjoy end-to-end transactional transparency. 

“The right technology will reduce manual effort and equip controllership teams with visibility and insight across the group, addressing one of the largest issues faced with the current process,” writes Gartner.⁵

The call to transform intercompany accounting processes isn’t just a recommendation, it’s what’s required to keep up with a fast-moving trend. According to Gartner, “By 2027, 20% of controllerships will have fully automated intercompany accounting in their journey toward autonomous finance.”⁶

What does this journey look like? It starts with assessing your current operation and determining what aspects need to be optimized. “Capture and prioritize inefficiencies,”⁷ advises Gartner. “Corporate controllers must understand the current intercompany process to diagnose which component parts are not working effectively.

Additionally, “Typical methods to uncover these categories and their related subcategories include traditional process mapping and process mining tools.”⁸

Your assessment should guide you on what capabilities your solution should provide, although, as Gartner makes clear, you should ensure that it offers certain features.

Expected capabilities from technology include:

• Enabling automated intelligent intercompany analytics and reporting

• End-to-end transactional transparency for all intercompany stakeholders

• Centralized dispute management

• Automated cost and tax allocation

• Automated intercompany processes

• Allocated vendor invoice management

  Gartner, Technology Approaches to Unify Intercompany Accounting, Permjeet Gale, 9 February 2024.

Throughout the optimization process, be sure to keep stakeholders updated and seek their input. This will help them feel involved and facilitate buy-in. Finally, consider how digital skills and competencies will need to be adjusted. You should assess the necessary technological skills to implement, run, and monitor a new solution.

Trying to fix intercompany issues by only improving processes will not deliver a critical path to long-term profitability for multinational corporations. To reiterate what was stated earlier in this article, Gartner says, “Without addressing a scalable intercompany process that includes technology, organizations will struggle and continue to negatively impact business outcomes.”⁹

Companies need a holistic approach that includes partnering with a solutions provider that knows the industry and can offer a complete solution that optimizes intercompany processes at the time of implementation and far into the future.

¹Gartner, Technology Approaches to Unify Intercompany Accounting, Permjeet Gale, 9 February 2024.
²GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.
³ Gartner, Technology Approaches to Unify Intercompany Accounting, Permjeet Gale, 9 February 2024.
⁴Ibid.
⁵Ibid.
⁶Ibid.
⁷Ibid.
⁸Ibid.
⁹Ibid.