Key Considerations for Intercompany Processes
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Key Takeaways
⇨ CFOs should prioritize intercompany processes as they significantly affect multiple financial departments, and poor management can disrupt efficiency across the enterprise.
⇨ Addressing inefficiencies in intercompany workflows—such as manual processes and untracked records—can lead to improved accuracy and significant cost savings, potentially ranging from $1-2 million annually for larger organisations.
⇨ Companies should adopt automated solutions to overcome intercompany challenges, as more than 89% are still relying on manual processes which introduce errors and bottlenecks.
As major enterprises around the world grow more complex, intercompany financial management plays a more significant role in the daily life of the average CFO. Though these processes are essential to maintaining the financial health of the overall business, companies have struggled to execute their intercompany strategies with maximum efficiency.
SAPinsider’s recent SAP S/4HANA Finance report found that 26% of companies said that group reporting and intercompany reconciliation was one of the biggest pain points among their financial process, making it one of the most commonly selected answers.
To help companies better manage their intercompany processes, BlackLine highlighted the top five strategic considerations companies must make to streamline these essential workflows.
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Maximising Intercompany Efficiency
- Consider the wide range of effects intercompany processes have
Intercompany transactions can affect how accounting, finance, tax, and treasury departments operate. This is why they must be a focus area for CFOs and finance leaders. While the effects of a well-run intercompany process can spread better control and efficiency throughout the enterprise, inefficient processes can disrupt virtually every financial team in the company. CFOs should prioritise these workflows accordingly.
- Address inefficiency and its root causes
Companies aiming to bolster intercompany inefficiency should look for several common culprits – manual processes that can lead to data entry errors, bottlenecks in crucial workflows, and untracked records. Organisations should find automated tools like those from BlackLine to address any potential inefficiencies and insulate themselves from risk.
- Implement cost management strategies
As with many other processes, CFOs must strike a balance between managing costs and accomplishing their strategic goals. It is worth noting that larger companies with billions in revenue can achieve $1-2 million in potential annual cost savings if they can improve any issues within a poorly controlled intercompany process.
- Understand the potential costs of poor intercompany processes
BlackLine has found that nearly 40% of CFOs are unsure about the quality and accuracy of their organisation’s financial data. These inaccuracies can lead to non-compliance penalties and audits can result in significant financial penalties. This comes in addition to the additional costs associated with poor execution, as companies extra time and resources to overcome inefficiencies.
- Find tools outside of the ERP basics
ERP systems like SAP are often insufficient when handling the vast majority of major intercompany challenges. Yet many organisations are still hesitant to rely on third-party solutions like BlackLine to help them overcome intercompany issues. This leaves them with functionality gaps and outdated methods that are typically insufficient to meet their needs.
What This Means for Mastering SAPinsiders
Beware the hidden costs of intercompany issues. Nearly half (43%) of CFOs feel that they could be at risk of an SEC investigation because of potential issues with their data and other irregularities. This concern permeates throughout all financial teams within a company. Additionally, inefficiencies could be costing businesses millions of dollars in wasted effort and lost opportunities. These issues are difficult to calculate when making a business case for intercompany solutions, but should be considered.
Don’t go it alone, rely on experience. Companies need to understand the realities of their situation when it comes to intercompany challenges. Many organisations are relying on outdated tools, leading to inefficiencies and bottlenecks. These companies must find experienced partners like BlackLine to help them introduce intercompany automation into their key processes.
Automation is the answer to intercompany issues. SAPinsider research report found that just 11% of companies have intercompany automation solutions in use. This means that the vast majority are still using manual processes that can introduce errors and bottlenecks. Leveraging automated solutions can reduce the inefficiencies they struggle with, freeing up finance professionals to spend time on other important work.
