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Abounding businesses? 6 tips to simplify inter-company accounting


6 tips to simplify intercompany accounting

As your business grows, it may choose to consolidate, add overseas entities and/or create LLCs to meet strategic goals and legal needs.

That can be a great achievement for your business, but tough on you as its accountant. Not only can routine accounting become significantly more complex, but your firm may be monitored more closely for missteps — even if your practice is small. One Deloitte poll of accounting and finance professionals found the greatest inter-company accounting challenges to be disparate software systems (21.4% of respondents), inter-company settlement (16.8%), complex inter-company agreements (16.7%), transfer-pricing compliance (13.3%) and foreign exchange exposure (9.4%).

“While a lot of accounting, tax, treasury and other corporate leaders are focused on money flowing into and out of their organizations, inter-company accounting … can become a real challenge to those experiencing global growth, M&A and supply chain integration,” advises Deloitte Advisory partner Kyle Cheney in the report. “For companies of nearly any size, internal transactions incorporating products and services, fee sharing, cost allocations, royalties and financing activities can create inefficiency, financial exposures and reporting risk.”

Alivi consolidates multiple entities with Gravity Software

Fortunately, being aware of potential issues can help keep your inter-company accounting on track. Consider these suggestions for streamlining processes.

  • Establish control from the start. Set clear roles and authority around entering into and approving inter-company transactions so accountability is well-defined.

  • Choose a tool that can save you time. Optimize a multifaceted accounting software that allows you to personalize dashboards that can reflect accurate metrics across entities while adjusting for differences in pricing and analytics. The ideal tool will offer everything you need on one interface and provide efficiencies such as real-time data, cross-company journaling, billing, vouchers and allocations and automatic account balancing. Customer payments and collections should be consolidated and easy to manage with the right tool in place.

  • Integrate reporting capabilities. Inter-company transactions should be seamless (and easy to track) if you establish common charts of accounts that are processed in standardized ways and aligned with up-to-date tax, statutory and finance requirements.

  • Create a cash management strategy. Your system should define when settlements require cash transactions versus accounting entries. That will help you minimize bank fees, maximize interest and provide into allowing your company to hedge currencies.

  • Stay informed about different regulations. Be aware of key legal stipulations such as “arm’s length” pricing laws that dictate the amount charged between related companies must be the same as if they aren’t related. “Learning one country’s tax and business laws and codes can be a complicated undertaking, (but) juggling the regulations and codes of another country or even numerous other countries is a compounded problem,” explains a recent blog on Trintech.com.

  • Over-communicate. Finance staff at your company’s various entities should regularly discuss issues to ensure conflicts are minimized, changes are observed and deadlines are met.

If you’re struggling to efficiently manage your inter-company accounting, Gravity Software® may be the answer. Gravity provides multi-company business intelligence (BI) dashboards (based on Microsoft’s Power BI tools) that offer all the analytics you need to manage multiple company financials on one screen. Because Gravity is built on the Microsoft Power Platform (aka Dynamics 365 CRM), users can easily add the business modules that will be most valuable to their organizations. With more than four million users worldwide, Gravity fills an important gap between entry level accounting software like QuickBooks and expensive enterprise applications such as Sage Intacct. Request a demo today.

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