Keep it balanced

In an era of global trade, mergers and acquisitions, and increased regulations, intercompany accounting—recording financial transactions between different legal entities within the same parent company—is a significant challenge that affects companies of every size. Think about it: as your global footprint grows, an increasing number of intercompany transactions happen. Then, they are immediately complicated by local tax requirements, multiple currencies, transfer pricing, and disparate systems and applications.

If transactions are not processed correctly, intercompany invoices and other out-of-balance positions can seriously impact the financial close, creating compliance issues, risks of restatements, SEC imposed fines, and shareholder lawsuits. That’s where intercompany services make a difference. A well-defined framework for end-to-end intercompany and transfer pricing processes adds structure and helps identify high-impact improvement opportunities allowing companies to systemically enforce leading practices.

Are you struggling with these challenges?

Many organizations downplay, oversimplify, and even ignore intercompany accounting issues (it nets to zero, right?). That’s dangerous given that transactions between related entities aren’t independent. A profit or loss from these transactions can’t be included on consolidated financial statements—not to mention the significant tax or regulatory implications.

Here are some indicators that you might need to reevaluate your intercompany approach:

  • Complex corporate structure results in increased intercompany transaction volume
  • Lack of established intercompany agreements
  • Undefined policies and procedures for transaction processing, approvals, accounting, balance sheet reconciliations, and netting and settlement
  • Extended close cycle times
  • Increased out-of-balance conditions
  • Non-compliance with local tax authorities
  • Manual processes requiring significant effort among trading partners to create intercompany invoices and post related transactions, perform balance sheet reconciliations, and net and settle transactions timely
  • High dollar and volume of cash settlements for intercompany transactions
  • Little to no use of technology enablers for intercompany processing, invoice generation, and accounting

 

Finance leaders who take a strategic approach and invest in intercompany services and improvements stand to capture substantial benefits across speed, quality, and cost.

Why Clearsulting?

Multiple teams are involved in intercompany accounting—tax, treasury, operations, controllership, and more. We start by bringing everyone together to document current processes, identify gaps as compared to leading practice, determine areas for optimization, and advise on a technology strategy and roadmap.

Along the way, we look for places where spreadsheets, emails, manual journal entries, verbal approvals, or other workarounds expose you to significant financial, compliance, and reputation risk.

Beyond that, our intercompany services feature:

  • Proven intercompany implementation methodology
  • Skills at assessing what can be done from a technology standpoint and then implementing or optimizing the technology you have
  • Experience implementing BlackLine Intercompany Hub at multiple global organizations
  • Leading practices for reducing out-of-balance conditions and accelerating cycle times to process intercompany transactions and reconcile related accounts during the financial close
  • Dashboards for performance monitoring with KPIs and metrics
  • Automation recommendations for intercompany matching and reconciliation

Together, we’ll analyze the value chain so you can better understand and execute accurate taxing policies and transfer pricing agreements. The result will be streamlined intercompany accounting with greater visibility and control across transactions.

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Our intercompany offerings 

  • End-to-end intercompany process improvements
  • Gap-fit analysis
  • Policy creation and governance
  • Global chart of accounts design
  • Out-of-balance reduction
  • Global statutory reporting support

Go further with Clearsulting

Few large companies have a fully mature operational transfer pricing and intercompany process, even though studies show that significant improvement opportunities exist across multiple intercompany processes. 

Our intercompany implementation methodology and process improvements will accelerate reconciliation cycle times, reduce the effort required to investigate and resolve issues, and allow you to net payments so you have less to settle at period end. It sounds daunting, but with strong leadership and a focused strategy, it’s achievable.