Q Why are companies increasingly overwhelmed by intercompany operations?
A For one thing, increasing globalization continues to produce new regulations governing the financial transactions that cross a company’s domestic and global legal entities. A case in point is the OECD’s 15 percent global minimum tax. Domestically, several tax regulations like the amortization of R&D expenses are now in limbo. Failure to stay on top of shifting cross-border tax rules is a key intercompany challenge overwhelming accounting staff. Other challenges include a resurgence in global trade as the supply chain debacle settles; a looming recession, compelling CFOs to impose expense reductions across different entities; and expectations for global M&A activity to pick up. These varied challenges increase the risk of messy intercompany mistakes.
Q Can you provide some examples?
A When an organization expands globally, the increase in intercompany transactions can result in out-of-balance accounts, tax and compliance issues, write-offs, and possible restatement. In M&A, you can end up overpaying for an acquisition of a company with unknown write-offs. If you acquire a company that incorrectly calculated financial transactions between the different legal entities, you now own their problem and can take a hit.
Q What do leading organizations want from their intercompany processes?
A They want to clean up the mess to ensure greater collaboration across accounting, tax, treasury, and finance, since the complexity of the intercompany processes increases as areas beyond accounting come into play. An example is the need for the right information to support positions on tax policies and transfer pricing. The granularity of data is key to ensuring compliance. Assuming real-time visibility into this information, leading companies can quickly identify intercompany exceptions and underlying transactions causing out-of-balances. They can then quickly resolve these discrepancies to achieve consistent regulatory and tax compliance.
Q What is IFM and the benefits for leading organizations?
A Intercompany Financial Management (IFM) is a new “process-plus-technology” way of approaching intercompany operations. The combination of standardized processes and automated technology improves operational efficiency, accounting accuracy, tax positions, forecasts, and staff productivity, freeing up time to analyze problems like the aging of open disputes. IFM offers a real-time view of intercompany transaction data, minimizing FX exposure, tax leakage, and the days it takes to close.
To learn more about Intercompany Financial Management and how BlackLine helps customers achieve intercompany operations excellence, visit us at blackline.com/intercompany.
Companies come to BlackLine because their traditional manual accounting processes are not sustainable. BlackLine’s cloud-based financial operations management platform and market-leading customer service help companies move to modern accounting by unifying their data and processes, automating repetitive work, and driving accountability through visibility.