Solving the real and underlying challenges of your intercompany reconciliation is something we in the financial department seldom get around to doing. Our books are only allowed to be open for a few days after the official date of closing and this time-pressure means we only get the chance to do what is necessary before they are closed. We rarely get the chance to really investigate our need of policies to solve intercompany reconciliation – which, as we all know leads to problems further down the road – leaving us with an unsatisfactory outcome, occurring time after time.
Many companies have reconciliation issues related to intercompany accounts. These issues can cause the books to be kept open for days or weeks longer than necessary. A company must have strict controls in place in order to keep the balances in check, otherwise the problem will continue to grow – quickly becoming utterly unmanageable.
The issues with intercompany reconciliation are usually due to a lack of clarity or communication between departments which, in turn, could be down to a lack of corporate support or simply a lack of consideration. For example, shipping can sometimes be charged on top of any physical orders yet missed on the purchase order. The purchasing department may then not pay the shipping charge leaving an out-of-balance situation if the issue is not resolved by the end of the month.
Another intercompany issue faced by many companies is intercompany charges. Some companies charge their subsidiaries based upon their working capital as an incentive to keep working capital as low as possible. Disagreements over the calculation of these charges could also lead to an imbalance in the intercompany accounts. Again, a lack of clarity when passing the charge, or a lack of acceptance when receiving the charge, has the potential to cause an out-of-balance situation.
Most of the underlying issues are actually due to the lack of top-down policies and/or education about them. Policies such as:
- General reconciliation practice
- Responsibility for reconciliation
- Specific format for reconciliation
- Responsibility for internal control
- Transfer pricing
- Foreign currency
- Intercompany cut-off policies
- Formal confirmation procedure
- Dispute resolution
But we managers and staff in the Financial departments simply do not have the time to deal with these policy issues. Because, if we did find ourselves with any extra time, it would be quickly eaten up by the intercompany reconciliation process itself – amongst many other priorities.
A Detective Tool
One potentially invaluable solution, is to bring in an account reconciliation system. A system that will make the detective work – identifying the exact transactions that don’t match – much easier. A tool that will free up your time to create top-down policies and reduce the tiresome manual checking even after the policies are in place.
It is for reasons like this many CFO’s, Finance Directors etc. have turned to us at Adra Match for our intelligent automatic reconciliation software – our very own detective tool. Our cloud-based solution allows you to side-step the usual draw-out IT approval and get automatic reconciliation up and running in just half a day (plus a few hours learning time).
If you’re running low on time and need a system in place that automates your reconciliation tasks, freeing up time to implement new top-down policies, then book a free online demo of the Adra Match software or get in touch today to find out more.