If you’re moaning in recognition as you read this, you may take some solace in knowing that you’re not alone. Sorting out trade partner accounts can be a perennial pain and a big-time thief for finance teams. Attempting to close the books in their individual organizations, even in the most well-run conglomerates and multinational groupings is often a task cut out for the best.
Why are Periodic finance accounts such a hurdle?
What is the source of the issue? In our opinion, a large portion of the problem arises from the idea that the merging process is often viewed as a chance to detect but not necessarily fix intercompany conflicts.
Most of the time, these concerns wind up in an extremely large ‘To’ file, labeled ‘to be researched’ or ‘too difficult for the time being.’ Solving problems usually necessitates the participation and support of similarly stressed colleagues from throughout the organization, and it might take multiple weeks or up to a month to accomplish them properly.
The result? A continuous series of bookkeeping adjustments and the subsequent cascade of repercussions – think company’s financial modifications, account consolidations, and tax position revisions.
Blaming Poor Processes
Intercompany processes that are less than excellent are at the heart of many business groupings’ problems. While corporations often have strong, well-structured frameworks in place to oversee third-party transactions, the policies controlling interactions ‘inside the family’ might be an afterthought.
It is fairly unusual for methods aimed at handling these operations to grow spontaneously, with each organization developing its own “rules” for interacting with sibling corporations.
The non-standardized, disjointed procedures that evolve as a result do not lend themselves to coordinated transactions across companies, teams, and systems.
In reality, the opposite is true. We commonly observe identical transactions recorded at two distinct times, sometimes even in two separate accounting periods, with two distinct currency exchange rates.
Even when the statistics on both sides match, the documentation isn’t usually in apple pie sequence. Invoices may not fulfill the legal standards in the jurisdiction of the recipient organization, or GST and shipping charges may be applied erroneously. Checking documents and filling in the gaps might slow down the closing process. When an activity must be done dozens, or hundreds of times every quarter or term, it becomes unsustainable.
One Solution to Multiple Systems
One alternative is to require all companies inside the corporation to coordinate their ERP platforms and internal procedures, although this may be a significant endeavor. The time and money needed are likely to be substantial imposts that will necessitate the deployment of scarce in-house resources. Meanwhile, the issues continue.
That is precisely what inter-company financial managing software accomplishes. It increases closing time and accuracy while lowering intercompany administrative expenses by clearing up the work of operations and finance teams throughout the group. It allows them time to focus on higher-value work when linked with international vendor invoice management capacity.
The article has been published by the editorial board of the Fintek Diary. For more information please visit www.fintekdiary.com
