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How Better Intercompany Systems Can Improve Treasury

How Treasury can ensure a company’s legal entities have adequate cash flow and liquidity through an automated intercompany infrastructure.

Dave Rusate
Dave Rusate

Dec 03, 2021

The world of business is currently evolving at such a rapid pace that legacy systems simply cannot keep up. At the same time, treasury, like most departments within a multinational corporation, is being continually challenged to do more work, with less people. To stay ahead of the game, treasury needs a solid, automated intercompany infrastructure. This post will explain why.

Treasury’s overarching challenges

To better understand the benefits of an automated intercompany infrastructure for treasury, it's worth taking a moment to briefly examine the big picture impacts of technology on treasury’s key challenges.

One of the treasury department’s biggest hurdles right now involves the ability to foresee market developments. The treasury department needs technology that allows it to foresee market developments such as interest rate fluctuations or foreign exchange devaluations in certain countries.

Technology also plays a key role in managing another of treasury’s key hurdles, namely satisfying the needs of the modern workforce. Younger employees seek faster growing career paths. They can readily move to other companies because their hands are not necessarily tied by pensions, which are no longer provided by most companies as they were in the past.

Armed with the right tools, you’re better able to give these younger employees what they want. You can retain them longer and make them more productive. This is because automation positively affects culture. By empowering employees in treasury and elsewhere with technology that makes their jobs easier and more rewarding, you put them in a position to be successful. You allow them to feel like they are making a difference.

The benefits of a solid intercompany billing system

In order to facilitate the intercompany exchange of goods and services within a parent company, you need to make sure that all the legal entities with a company have adequate cash flow and liquidity. To do this requires a solid intercompany billing system; one where you can invoice between legal entities with the appropriate tax guidance and application on those invoices. Then you can settle the invoices on an internal billing system or platform that is both prompt and efficient.

A solid intercompany system would eliminate most of the re-work caused by invoicing problems. It would eliminate manual or other types of invoicing errors. It would eliminate tax errors where tax is applied incorrectly in different countries. This is especially important because tax errors can wreak havoc on a company's reputation. If your credibility in the marketplace is tarnished, it can take a long time to repair that reputation. So, a good intercompany system is required to help keep one’s company out of trouble.

A significant part of what treasury manages is liquidity, and intercompany is, on average, close to 50% of a company’s total liquidity. This is something you can control by putting good systems in place. If you do a good job of setting up and using the right type of vendor payment and invoicing processes, you can drive a lot of your efficiency.

Ample liquidity allows companies to finance new technologies being developed within the company, which leads to new products, new sales and leads, and ultimately new revenue and income. Improved cash flow and liquidity also allows companies with debt to more aggressively pay down their debt and reduce interest expense. Liquidity also helps companies acquire other entities because they have the cash flow to support those acquisitions.

Without state-of-the-art technology and automation, treasury must rely on an increased headcount and pay the associated cost. There’s also a lot of manual re-work and a general reliance on cumbersome spreadsheets.

How FourQ Helps the Treasury Function

FourQ empowers the treasury function with reliable intercompany financial management. It allows you to efficiently pay your bills and invoice your intercompany customers. Most importantly, it interacts easily with most treasury management systems as well as general ledger systems.

Treasury has a lot of interaction with tax, and the tax functions in FourQ’s OneBiller are critical to the success of a treasury department as well as a tax department. FourQ provides the general ledger entries directly into multiple types of third-party general ledger systems. It does so in an error-free and consistent fashion. It helps eliminate tax errors, keeps the company out of trouble, and frees up more time for the treasury team to take on more productive tasks.

With the automation introduced by FourQ, peoples’ jobs are more rewarding. They’re able to focus on doing things they love to do and are adding value to the company going forward as opposed to just creating journal entries to fix errors and to do a lot of manual work that’s not interesting or adding a lot of value to the company.

Being more efficient and doing more with smaller teams is a key goal that treasury departments and other functions in companies share. FourQ allows corporations to accomplish that.

Dave Rusate

Dave Rusate is Founder and Principal at Rusate Capital Management LLC. Prior to forming Rusate Capital Management, he was Treasurer of GE’s power business, its largest one. Dave worked at GE for over 30 years.

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