Background

A key component of a Peeriosity membership is the ability to benchmark quantitative performance in eight key process areas, and the ability to see differences in structure and design for 28 different business processes that are often candidates for Shared Services. This research abstract looks at the composite results of the structure and design survey as it relates to the Intercompany Accounting process.

Intercompany Accounting Organizational Structure

Looking first at the results related to the organizational structure for Intercompany Accounting, the majority of companies (44%) include Intercompany Accounting as part of their Shared Services operation.  Additionally, 20% of the companies continue to use the traditional design of having this as a Corporate function, with a hybrid design(Combination of Two or More) also being utilized by 20% of the corporations participating in the research.  Finally, the decentralized design had 16% of the responses.

This research shows that Shared Services continues to expand its role as the preferred organizational structure for processes like Intercompany Accounting as companies proceed to consolidate Record-to-Report type functions into this type of environment.

Intercompany Accounting Geographic Design

Because the nature of Intercompany Accounting frequently relates to transactions that are between different legal entities, these are often both cross-border and managed by different accounting systems that eventually interface with the consolidated general ledger. Country-specific statutory requirements, exchange rates, the timing of entries, as well as any number of variables can cause imbalances that require research to resolve. Transactions arising from the movement of product and material (direct and indirect), as well as sundry billing for services (including Shared Services and corporate allocations).

Considering the significant level of variation in regulatory requirements between countries, especially in Europe and Asia, it is challenging to implement a global approach to Intercompany Accounting, with just (22%) having incorporated that type of structure so far.  While many organizations take a country-specific (24%) or multi-country (13%) approach to geographic design, a comparable percentage (33%) have either a regional center or multi-regional structure to take advantage of the inherent efficiencies that can be realized when utilizing that type of design.

Intercompany Accounting Process Standardization

Most organizations work diligently to reduce the number of legal entities within their organizations. However, for statutory, tax, and legal considerations, the number of legal entities can be relatively large and drive a significant number of intercompany transactions. Issues arise due to a number of items, including the timing of payments/transfers being recorded, exchange rates, and pricing issues, to name a few.  Process standardization can help to mitigate these factors and streamline the overall workflow, including between subsidiaries of the same legal entity, which can be a substantial share of the total transaction activity handled by Intercompany Accounting.

Looking at the benchmark results in this area, 38% of the companies utilize a global approach to process standardization, which is over twice as prevalent as the second most popular response, single-country (18%).  The other three approaches to standardization (multi-regional, regional, and multi-country) are fairly even in their popularity and 13% of the companies are not standardized at all in the Intercompany Accounting process area.

Intercompany Accounting Labor Sourcing

While outsourcing the Intercompany Accounting function has been a viable alternative for a number of years, most companies (70%) continue to retain this process in-house as an on-shore captive process (61%) or in an off-shore captive (9%) structure.  In fact, no companies reported that they outsourced onshore, and only 2% indicated they outsourced offshore.  For 28% of companies a mix of options, between onshore, offshore, and captive or outsourced, are used, with no single option accounting for at least 75% of the activity.

Further details regarding these survey results, including company-specific responses, are available to Peeriosity members in the Benchmarks section of the General Accounting research area.

How well does your company’s current Intercompany Accounting design support your company?  When was the last time your approach to Intercompany Accounting was evaluated?

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