4 Steps to transform your Intercompany Reconciliation

In a recent survey conducted by BPM International, 72% of the companies which participated noted that they are spending significant time clearing intercompany (IC) differences, while 31% of survey participants identified the process as a significant barrier to their financial close. Our work with clients showed that companies nowadays tend to move beyond the initial need to comply with legislation and are focusing instead on driving sustainability and control into their corporate processes. By improving on IC reconciliation, you can easily bring order to the data jungle and achieve a faster financial close. 

In this blog post, read what makes IC reconciliation so difficult and how you can transform the IC reconciliation process easily. 

What are the intercompany reconciliation challenges?  


  • Separate accounting structures exist. 

Transforming intercompany reconciliation in 4 steps 


graphic transforming ic reconciliation process
Figure 1: Transforming IC reconciliation

Step 1: Develop standardized global policies 

Companies spend an enormous amount of time agreeing on a wide variety of reporting practices being used. If the parent company categorizes and tags its transactions in one way and the subsidiaries do it differently, the result will be another data mess that your accounting teams have to deal with. Errors in your financial statements are almost inevitable. 

Formalizing clearly defined governance and policies to subsequently automate the agreed rules eliminates the need for counter parties having to book and correct intercompany transactions. Having a single process for collecting and distributing intercompany transactional data eliminates any issues over currency values, transaction amounts, and tax implications. 


Step 2: Data integration from multiple sources 



Step 3: Clearly defined workflow 

Going back and forth on email with disputes around the reasons behind intercompany discrepancies can often become a high burden on the finance teams. On the other hand, structured workflow ensures that all steps of the intercompany reconciliation process are completed in a logical order, subject to the required approvals and controls. 


Step 4: Improved visibility 

Despite a growing complexity of business, traditional approaches to intercompany accounting do little to remove risk from the process and provide limited if any visibility upon the status of intercompany reconciliations. 

Technology-enabled solutions offer the capability to monitor real time the progress of intercompany reconciliations at any point during the month. Customizable analytics and dashboard capabilities provide visibility to authorized users to track status and progress by selected criteria, for example company, region or close milestones. 

Summary: How to transform IC reconciliation 

It’s clear that companies could save time if their reporting units adopted a peer-to-peer reconciliation process to communicate and resolve differences directly with one another, thereby moving the responsibility for getting things right from central finance team to the reporting units themselves.  

Although this seems the obvious way forward, research shows that organizations find such transformation quite challenging and complex, resulting in only 4% of companies achieving the leading maturity level of the IC reconciliation process (Deloitte Development LLC 2017).  

Nonetheless, developing companies should note that by applying technology for intercompany reconciliation, you can make radical process changes with little effort and potentially achieve significant gains in efficiency. These gains aren’t all financial in nature and can include easing the burden on the central finance function and transforming its role into that of supervisor rather than executor of the IC reconciliation process.  

We have summarized how a professional FPM software can help you to optimize intercompany reconciliation. Take a look at our solution page: 

Intercompany reconciliation software