Research by FourQ, in conjunction with Dimensional Research, titled “The Reality of Intercompany,” uncovered widespread issues related to corporations’ intercompany processes and procedures that have a detrimental effect on business outcomes and their finance and accounting teams. Concerningly, 98% of respondents say intercompany issues negatively impact their accounting and finance teams.
Intercompany is a complex and difficult function. FourQ’s research indicates that intercompany has a profoundly negative effect on finance and accounting employees when it is badly managed or misunderstood. Why is this the case? From our experience, it becomes an issue because intercompany is expected to simply “work.” It should not add any revenue or expenses to a company’s books -- it should net zero. And because of this assumption, no one looks closely at intercompany until issues arise. And in global organizations with multiple entities often operating across different systems, issues surface quickly. At close time, employees find themselves alienated from their families, holed up in the office, for multiple days. What’s more, they often work through the night and get by on minimal sleep.
Key findings from the survey highlight intercompany as a real source of stress for accounting and finance personnel. 60% of survey respondents agreed that increased stress among team members due to intercompany causes physical or mental health issues, with a mere 2% saying there is no negative impact for team members.
Additional employee stress was reported due to long close cycles requiring extreme work hours according to 44% of the survey respondents. 90% of finance professionals surveyed report all-nighters to be a regular occurrence as a result of intercompany issues. Close to half of respondents noted that team members feel guilty about taking time off. 57% of respondents said that employee churn makes it harder for the remaining team members to find answers – making the situation worse.
Working across time zones adds additional stress at close time. The fact that staff in non-US countries will at times take longer vacations makes it difficult to get answers when you most need them. Trying to reconcile your books requires scheduling time-consuming meetings to determine where the disconnects exist between one variance and another.
And the negative conditions caused by intercompany don’t stop with the accounting and finance team. Resentment between groups is caused by disagreement over transactions between legal entities according to 44% of those surveyed. While 51% said business stakeholders respond negatively to allocation and reconciliation issues, which is demotivating for all involved.
These survey results confirm what FourQ has long known to be true -- the effects of poor intercompany management are having a major impact on productivity and morale within many multinational companies that fail to improve intercompany process and automation. 83% of those surveyed said they have more than five ERP instances, with 96% agreeing that ERP systems only partially solve intercompany challenges.
Very few ERPs can manage the complicated intercompany processes of large corporations - even with extensive and costly modifications. That’s why more and more companies are turning to the technology and discipline manifested in intercompany financial management.
Intercompany, in principle, should simply move costs from one legal entity to another to satisfy service-level agreements or move the costs of goods and services to the end beneficiary. Each transaction is expected to balance for an overall net-zero impact on business financials. However, in practice, this is more complex. Each region is beholden to its local tax policies and regulatory scrutiny. The different systems used by different legal entities may not share data or workflows. The exponential growth of transaction volume makes it difficult to manage disputes among stakeholders. Global companies with complex operations consider intercompany the cost of doing business; however, too many business leaders don’t even think about it until it’s already created a problem and introduced risk — at which stage it becomes a key priority.
The key to improving intercompany according to intercompany stakeholders is technology innovation. Survey respondents confirmed they would benefit from additional technology capabilities such as automated intelligent intercompany analytics and reporting (68%), end-to-end transactional transparency for all intercompany stakeholders (56%), centralized dispute management (55%), automated cost and tax allocations (55%), additional automation for manual intercompany processes (50%), and allocated vendor management (47%).
Providing automated intercompany processing seamlessly integrated with global vendor invoice management, FourQ helps multinational companies increase efficiency and improve global business operations. This increases operational productivity while saving millions of dollars annually through improved intercompany billing and payment and tax optimization.
Discover why FourQ processes over $34 billion annually across 110 countries and how it can transform global operations at your organization.
FourQ acquired by Blackline, leading financial close and accounting automation platform. Learn More.