The coordination of intercompany (IC) relationships is becoming more and more important both at the level of the individual company and that of the group. They often form a serious bottleneck in the preparation of financial statements. It doesn't have to be that way. If coordination processes and the upstream IC processes are optimized, it is not only the closing process that becomes faster. The quality of financial data is also increasing.
The reality shows that the coordination and consolidation of the group-internal service relationships often forms a major bottleneck in the preparation of financial statements in financial departments.
Considerable capacities are often tied up both at individual company and group level with the clarification of IC differences that arise. These could be used elsewhere to add value. The increasing importance of the IC reconciliation process in the context of financial statements preparation is due to a number of external factors.
These factors include, for example, increasingly interlinked, international value chains that lead to a high number of IC transactions or acquisitions that result in heterogeneous system landscapes as well as different chart of accounts and accounting processes. Other drivers are the increasing complexity of business models and the increasing pressure on the financial markets for quick company closings. The ever increasing quality requirements for the consolidated financial statements also pose challenges for CFOs when it comes to IC reconciliation.
The prevailing intercompany structures and processes often fail to meet the goal of fast, cost-effective and high-quality consolidated financial statements in practice. The following weaknesses occur in particular:
- No clear definition of Group-wide IC process regulations
- Manual and inefficient coordination process of intra-group service relationships
- Lack of transparency regarding existing differences and their causes as well as compliance with already defined rules
- Heterogeneous system landscapes without sufficient connection and integration of the upstream and downstream systems
CFOs need to automate reconciliation processes
In order to meet the complex challenges, those responsible should counteract the emergence of IC differences by optimizing the processes that precede the actual coordination process and still effectively clarify emerging differences in an automated coordination process.
The creation of effective and efficient IC processes requires an integrated, holistic approach with group-wide predetermined and clearly defined processes and rules for the upstream IC processes: ordering, invoicing, shipping and booking as well as payment processing. In addition, the efficient design of IC reconciliation offers the introduction of a software solution that makes a significant contribution to accelerating the reconciliation process by means of almost automated reconciliation with documents in transaction currency. Supplemented by continuous monitoring, the company can ensure that the prescribed rules and regulations are adequately followed.
The measures mentioned help CFOs to leverage optimization potential on the way to Fast Close or Quality Close, thereby speeding up the closing process and significantly improving the quality of financial data.