Legal entity structures are driven for statutory and tax efficiency purposes. As a result, a company may wind up with a complex structure that includes accounting transactions between entities that need to be reconciled on a monthly basis. While enterprise value may be added by having a complex structure, a greater amount of that value can be retained through an efficient method of reconciliation and early identification of issues.

Peeriosity features a General Accounting research area in which all webcasts are eligible for CPE credit. On a recent webcast, the peer group made of some of the world’s leading Finance and Accounting Shared Service centers discussed the Intercompany Accounting process.

Intercompany Accounting continues to grow in complexity and the reconciliation process can at times be a laborious exercise exacerbated by fluctuating exchange rates, acquisitions and divestments, changes in tax law, as well as variations in systems and processes. It is not that surprising that when asked, more than half of the poll respondents were not satisfied with their current Intercompany process and were aware of the opportunity to improve. Even more surprising, only 9% were very satisfied:

The follow-up poll question asked what was the largest impediment to improving the process. What was not cited as an issue was support from the business units or management

In addition to projects associated with Intercompany Accounting not receiving priority and a lack of resources, “Other” accounted for 35% of the responses. Peeriosity patent-pending ipolling allows for detailed viewing of results by responder as well as comments. In analyzing the “Other”, the most cited response can be summarized as a lack of interconnectivity between systems, which renders much of the process effectively manual. One comment summed up their frustration by indicating “it’s everything!”

Our webcast feature company has successfully reduced the cycle time of their Intercompany reconciliations through the automation of over 90% of the effort including the identification of items that require investigation. The company identified a few key enablers that have totally transformed the process:

• Leveraging a common ERP globally
• Consistent clean master data management globally
• Automating stock transfer across legal entities
• e-Invoicing and payment for direct purchases across entities
• Automating 3^rd party purchases sourced from another internal entity
• Payment through Netting multiple times throughout the month (side benefit is the reduction of FX variances)

The webcast discussion identified that many organizations that are not on a global ERP or have multiple instances can use 3^rd party tools to achieve a number of these enablers and the discussion included the names and relative implementation challenges associated with some of the 3^rd party solutions.

Overall, many best practices were shared, and, while many are frustrated with their current process, the webcast discussion identified very clear best practices and migration paths to enable greater efficiency in one of the more thankless, but critical, accounting tasks, Intercompany Account reconciliation.

What is your team doing to increase the automation, efficiency, and early identification of issues related to Intercompany Accounting?

Who are your peers and how are you collaborating with them?