Intercompany Accounting – the recording and reconciliation of accounts payable and accounts receivable activities that take place between separate legal entities of the same company – is often ripe for simplification and improvement.  Puzzling in a way, since, unlike trade accounts payable or trade accounts receivable transactions, all the parties involved are ultimately employees of the same company.

Two recent Peercast^TM discussions in Peeriosity’s General Accounting (R2R) research area featured leading global companies discussing their multi-year efforts to streamline and improve Intercompany Accounting processes.   Here are some of the discussion highlights:

• System consolidation is a key enabler by supporting the posting of product transfer entries automatically on each set of books.

• Consolidate all non-product intercompany activities into the same global center to create a single point where both sides of the intercompany transaction are posted.

• Implement a minimum threshold for intercompany invoices (Hint: if your limit is under USD $5,000 it is too low!)

• Work with your customers to move from monthly to quarterly invoicing.

• Implement a global payment netting process.

• Stay firm and don’t allow exceptions to invoicing policies.

A supporting iPolling^TM question asked member companies to indicate their current level of satisfaction with the level of automation and efficiency in their Intercompany Accounting process.  Surprisingly, only 9% indicated that they were “very satisfied”, with another 47% who were “somewhat satisfied … with room for improvement”.  The remaining 44% of member companies indicated that they were “not very satisfied … with numerous opportunities to improve”.   Clearly, for all but a few, many improvements in the Intercompany Accounting process are available.

When asked about the biggest obstacle to increasing automation or efficiency, the challenge cited by 40% of member companies is the issue of technology that does not adequately meet the standards required to achieve a high level of efficiency.   For 17% of member companies, “not being a high enough priority as compared with other improvement initiatives” was identified as the greatest challenge.  Here are the details:

Here are several of the comments from iPolling participants:

• As a global organization in 100+ countries, we have many legal entities doing business under various regulatory environments. These different environments often have requirements that present challenges for conducting business between entities. As we comply with these requirements, we find there is no “one-size-fits-all” solution, which makes standardizing and streamlining the intercompany processes difficult.

• We have a high degree of automation and efficiency around intercompany product movement, but the miscellaneous items that are not related to inventory require a much more manual process. We are working with IT for SAP-based solutions around matching, which should help. An additional challenge is the number of entities and the platform they reside on – we are not currently on the same instance of SAP for all legal entities.

• We have manual processes as a result of multiple instances of the ERP system.

• Another major obstacle we face with streamlining the intercompany accounting process is the variety of accounting systems in place globally. We are searching for a solution that can sit above all instances of SAP to act as an interface for intercompany transactions.

• We implemented standard processes for our core business activities. The combination of standard processes and accurate master data management are the critical success factors for managing intercompany activities. This year we will focus on the non-core business activities, including services and general recharges; activities that drive much of our reconciliation efforts.

• Having different ERPs across the company causes more complexities. We are trying to find a solution that can incorporate all of them.

What opportunities exist at your company to streamline the Intercompany Accounting process?  Do you have a multi-year plan to define and capture your Intercompany Accounting improvement opportunities?

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

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“Peercasts^TM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion.  Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content.  Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member.  Using Peeriosity’s integrated email system, Peer Mail^TM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees. 

 “iPolling^TM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated email system, Peer Mail^TM, members can easily communicate at any time with others who participated in iPolling.