Top 5 Strategic Intercompany Considerations for CFOs

According to SSON, intercompany transactions represent a massive share of the global economy—some 80% of global trade.

The sheer size of intercompany (IC) makes it more than just a financial necessity—it's a strategic imperative. For CFOs of large organizations, understanding the intricacies of IC processes can significantly impact your company's efficiency, compliance, and overall financial health. Let's look at how intercompany affects the entire organization, the risks of getting it wrong, and how BlackLine can help streamline these processes.

A study from The Hackett Group found that 64% of organizations that handle intercompany transactions state one of their biggest bottlenecks is “timely agreement with counterparties.”

Why is this the case?

Intercompany transactions are not isolated events. They ripple through the entire organization, affecting upstream and downstream operations.

Many departments interact with IC processes, including accounting, finance, tax, and treasury. Intercompany inefficiencies can lead to significant disruptions and financial discrepancies across multiple areas of the office of the CFO.

On the other hand, done well, a broad group of departments benefit through staff and process efficiency gains, better management of tax costs, and greater control of risks.

According to CFO Dive, intercompany transactions are substantial, with total dollar volumes reportedly being a factor of 10 or more of external revenue.

Ensuring robust controls and compliance in IC processes is not just about avoiding errors—it's about safeguarding the integrity of your financial reporting. And when we’re talking about factors of 10 or more of external revenue, that’s significant.

Efficient intercompany processes are vital for maintaining organizational agility and financial accuracy.

By automating routine tasks and ensuring accurate data flow between departments, organizations can reduce manual errors and free up valuable resources for strategic initiatives.

Among intercompany professionals surveyed by CFO Dive, 43% indicated they were at risk of an SEC investigation, and 38% stated that potential tax penalties negatively impacted their overall business outcomes

Inefficiencies in intercompany processes can be costly. From manual data entry errors to delayed reconciliations to tax penalties, these inefficiencies can lead to financial inaccuracies, compliance issues, and increased audit risks.

Understanding the true cost of these inefficiencies is crucial for CFOs aiming to optimize their financial operations. Investing in robust IC solutions can mitigate these risks and drive long-term savings.

The Hackett Group reports there is approximately $1-2 million in potential annual cost savings in a typical $10 billion revenue business that runs a poorly controlled intercompany accounting process.

One of the primary concerns for CFOs is managing costs without compromising strategic goals. The cost of intercompany processes, if not optimized, can become significant.   Leveraging technology and best practices, organizations can handle IC transactions more efficiently and cost-effectively, reducing operational costs and enhancing the strategic value of financial operations.

A BlackLine survey revealed that nearly 40% of CFOs globally do not completely trust the accuracy of their organization's financial data, which can be exacerbated by complexities in intercompany accounting.

The risks of mismanaging intercompany processes are significant. Financial inaccuracies can lead to compliance breaches, regulatory fines, and damaged reputations. In addition, inefficient IC processes can result in operational bottlenecks, affecting the entire organization's performance. The liabilities of not addressing these issues will continue to grow. For CFOs, understanding these risks is the first step towards implementing effective controls and ensuring financial integrity.

According to a Dimensional Research survey, 96% of respondents agree that ERP systems only partially solve intercompany challenges.

Enterprise Resource Planning (ERP) systems are the backbone of many large organizations, but they often fall short when it comes to handling complex intercompany transactions. ERPs were not built with intercompany processes in mind, leading to gaps in functionality and efficiency.

This is where specialized intercompany solutions come into play, offering the necessary tools to manage these transactions seamlessly.

Intercompany is a critical aspect of financial management and efficiency for CFOs. By understanding its impacts, managing costs strategically, and leveraging specialized solutions like BlackLine, CFOs can enhance their organization's financial integrity and operational efficiency. Investing in automating intercompany processes will drive long-term value and strategic growth.

BlackLine offers a comprehensive suite of solutions designed to streamline intercompany processes. On top of world-class intercompany automation, BlackLine offers exceptional accuracy by helping professionals in the office of the CFO prevent and detect intercompany errors by managing the transaction lifecycle from initiation through settlement.

Efficiency, a key theme we’ve focused on, is achieved by streamlining and automating end-to-end intercompany processes, eliminating bottlenecks and wasted time.

BlackLine also offers unparalleled intelligence with predictive guidance - powered by AI - to help prevent errors and surprises before they hit the books.