Introduction

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.  At many companies, Intercompany Accounting can utilize a significant amount of resources, as well as extend closing cycles and delay account reconciliations. Efficiency in managing Intercompany Accounting can eliminate a great deal of non-value-added activities.

Company Experience

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

• 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 miscellaneous intercompany invoices
• 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.

iPolling^TM Results Review

A supporting iPolling^TM question asked member companies to characterize their current Intercompany Accounting process.  The majority of companies (82%), are working to find ways to increase automation and improve quality, with the remaining 18% indicating that the process is highly automated, but they spend more time than they would like doing an investigation or rework.  Interestingly, none of the companies said that the process is highly automated and streamlined with high-quality results and little rework.

When asked when the last time they made a significant improvement to automation and quality of the Intercompany Accounting process 35% said within the past year, with an additional 6% saying it was in the past 1-3 years.  An additional 29% responded that it was 4-6 years ago, with 18% saying they are not sure but have plans to do so in the near future.  The remaining 12% also were unsure about the timing of the last improvements but indicated they have no plans to do so in the foreseeable future.

Some of the comments made by Peeriosity members that relate to this poll include the following:

Computers & Electronics Member:  Intercompany Accounting has been a high priority for our Finance team over the past few years. We continue to focus on making improvements in this area.

Manufacturing Member: Always looking for improvement.

Closing Summary

Considering the complexity of the Intercompany Accounting function at most major corporations, it is no surprise that these companies continue to struggle to improve this challenging process area.  However, there are a variety of ways to make significant improvements, some which can be fairly simple, like increasing the minimum threshold for miscellaneous Intercompany invoices for the cross-billing of services between legal entities.

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?

“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^TM.