By Ruth Richter • July 24, 2019
If you’ve ever been out to dinner with family and tried to split the bill among family members, you’ve probably gotten a very good—and unintentional—look at the complexities of intercompany accounting. Whether your family puts everything on one check and sends cash to each other through Venmo, or splits the bill evenly, or itemizes the bill, the process never seems to go as smoothly as hoped.
It’s much the same for intercompany accounting. This procedure, which involves a set of procedures that a parent company uses to move transactions between its subsidiaries off the regular books, is complex at best and disastrous at worst.
Intercompany Transactions Are Increasing, and Increasingly Complex
Intercompany accounting has grown as companies expand their footprints, both nationally and internationally. Subsidiaries are often acquisitions of similar businesses, be it previous competitors or even important suppliers. As structure grows, subsidiaries end up doing business internally with one another. These chains then end up generating a significant number of intercompany transactions that need to be compliant with regional and international regulations and tax policies.
Intercompany transactions appear in the financial statements but are not considered valid sales transactions by a parent company since they are internal transactions that do not impact the profit and loss of the company as a whole. Thus, intercompany transactions need to be removed from all consolidated financial statements.
Managing the Intercompany Sales Process
Removing these transactions isn’t as easy as it sounds. If a company’s accounting systems are sophisticated enough, they will automatically flag intercompany transactions so they can be removed when the finance team is preparing the consolidated financial statements. But if there’s no such feature available, each intercompany transaction must be identified manually. This is not only time-consuming but opens the process up to a wide margin of error. Smaller companies who may not have the ability to invest in accounting systems with all the bells and whistles will especially run across this issue.
Regardless of how your intercompany transactions are flagged, intercompany accounting can quickly become a major bottleneck in month-end close processes. Streamlining is an absolute must.
It’s not just the bottlenecking that is a concern: If intercompany transactions are not accurately portrayed in your company’s financial reporting, your company risks extensive regulatory fines and fees.
Automate Intercompany Accounting
Fortunately, there are tools that can help significantly refine your intercompany accounting process. IN-SYNCH by ROI Consulting is a Sage 100 application for real-time data synchronization with any third-party system. While you might already know us from integration between Sage 100 systems and ecommerce platforms, IN-SYNCH is also perfectly poised to connect subsidiaries that use Sage 100 and help automate the discovery of internal transactions for your intercompany accounting.
With IN-SYNCH’s flexible integration capabilities, the customization possibilities are endless. If the data exists in Sage 100, IN-SYNCH can make the connection. It connects to customer relationship management (CRM) software, where you may list your own subsidiaries as internal customers. It can also handle real-time inventory synchronization and revenue reporting. Which includes—you guessed it—intercompany transactions.
Plus, with its data mirroring capabilities, IN-SYNCH is lightning fast at delivering updates in real-time. No more waiting until the end of the month to identify and pull out internal transactions for your intercompany accounting.
Easier Intercompany Accounting by Next Month
Whether you’re an intercompany accounting veteran or just getting started, don’t wait another minute to easily integrate your process and eliminate the bottlenecks before your next reporting cycle. ROI Consulting has handled hundreds of fully customized integration projects and will ensure that your unique project is completed exactly as needed and just as promised.
Banish the intercompany accounting headaches today by contacting ROI Consulting here or calling us at 402-934-2223, 1.