Your company is now running operations worldwide? Your intercompany financial exchanges are counted in the thousands, use many currencies and have different tax frameworks? Congratulations! But there is a flip side to that coin… These exchanges can lead to complex situations when it comes to accounting reconciliations, whether it is about closing the gaps or getting hold of contextual data. It becomes a high-risk accounting process, especially for organizations dealing with large volumes of data or multiplying "exceptional" transactions, processed outside the system. However, in a context where intercompany exchanges represent nearly 80% of global transactions (1), it is more than necessary to adopt solutions - intuitive and secure - to facilitate these reconciliations.
For many international groups, accounting reconciliations remain a critical subject. Intercompany transactions are most of the time recorded in documents having tendency to get lost, or entered in local tools that do not speak to each other.
In fact, the issue of accounting reconciliations is too often the terror of accountants who find themselves confronted with it at the time of closing. These exchanges can be carried out between a parent company and its subsidiaries, or between two subsidiaries. They can relate to trade receivables or suppliers, reciprocal sales and purchases, loans, products and external charges ... But the objective is always the same: it is necessary to succeed in eliminating these "intercos" from the balance sheet and the income statement before starting the consolidation process.
By convention, intra-group transactions are considered to be part of the consolidation, quite simply because their elimination is often left to the care of accountants at this crucial time. However, while it is up to the group to organize this process, the discrepancies observed between the reciprocal accounts of the entities of this group constitute a subject of local accounting. As the "consolidators" do not have access to the sources of information due to the remoteness of local actors, it is easy to understand that accounting reconciliations can be tedious.
It should also be understood that this process is becoming more and more complex and time consuming. Transactions are multiplying, the coexistence of many systems and tools within the entities of the same group tends to complicate communication and exchanges, procedures are not always identical everywhere, transactions are carried out in different currencies, fiscal frameworks can change overnight in some States ... The risk of error therefore continues to grow, both in the identification of transactions and during the accounting reconciliation process, and worsens in the absence of homogeneous rules… and a tool capable of centralizing data.
This growing complexity transforms what is a simple principle, into a real scourge for organizations, because of the problems generated by accounting reconciliations. What problems, precisely?
First, the discrepancies in the elimination of intercompany transactions reconciliation. Discrepancies in recording or closing dates, conversion of transactions denominated in foreign currencies, assumption of VAT by the acquiring entity, rediscount of a receivable from banks, sale recognized as an asset, etc. One can imagine, for example, a transaction between a French subsidiary and an American subsidiary, recorded in euros by the first and in dollars by the second, but on different dates in separate ERPs - a situation that immediately creates an imbalance intragroup that can lead to tax complications, and even more due to the constant evolution of exchange rates. The simple fact of reconciling the two versions of the operation and, for the two entities, of agreeing on the cost of the transaction, on the exchange rate to be applied and on the management of VAT, is a painful achievement.
Then, the lack of a common base for the group's entities to collect and use contextual data, which is an essential prerequisite for reconciling discrepancies. This data can be scattered throughout emails, Excel files, discussions with multiple stakeholders, even loose sheets (for “unique” transactions processed outside of systems). Suffice to say that the risk of data loss is a daily reality that prevents the accounting process for intercompany reconciliations from running smoothly. And that's not all: the collection of data to be reconciled in order to resolve disputes and eliminate intercompany transaction gaps requires the mobilization of one or more people for several days, which represents a net waste of human resources within the group.
Two problems relating to accounting reconciliations that can be attributed to the heterogeneity of computer systems, and in particular to the coexistence of separate tools that do not speak the same language. A situation which reinforces the de facto separation between the accounting structures of the entities and leads to the formation of “silos” between the stakeholders, making every reconciliation extremely difficult. A downward spiral that leaves few loopholes.
Of course, these issues have consequences that organizations cannot ignore:
So many reasons that should push you to simplify (and optimize) your intercompany accounting reconciliation process. It remains to be seen how to do it!
Simplifying and improving the accounting reconciliation process involves addressing the problem at the root and acting on three levers:
This last lever - the place of the tool - is central. Because having a dedicated solution makes it possible to develop the essential accounting procedures (and to ensure their application), and provides employees with the necessary means to organize themselves,share essential information and avoid errors.
Organizations have realized the value of innovations in accounting. Thus, 82% of accounting and finance teams believe that the tools can help respond to intercompany transactions issues, such as transfer pricing or compliance issues (2).
However, if solutions based on advanced technologies (artificial intelligence, automation, Cloud) already exist to simplify accounting reconciliations, their limits are quickly reached: they make it possible to highlight accounting differences, but don’t really help in their justification, the contextual data having to be the subject of a manual search.
Trace, the solution developed by Stratumn, answers this problem. Faced with increasingly complex accounting reconciliation procedures, Trace offers an intuitive and secure solution allowing a group to monitor all data, interactions and financial flows, and to guarantee a global vision of the processes by reconciling financial and contextual data.
Trace insures compliance with reliable and irrefutable traceability, and all this taking into account the human factor - which is the most important one. At Stratumn, we remain convinced that technology must adapt to users, not the other way around. Automating tasks should not come at the expense of good collaboration practices. Trace therefore fully integrates this dimension: the solution is all the more effective when it is put at the service of employees.
Discover without further delay the Trace solution for accounting reconciliations and request a demo!