We rarely get to solve the real and underlying problems of intercompany reconciliation. The official closing date is only for a few days. This time pressure means that we are limited in our ability to complete what is required before the books close. We are rarely able to fully investigate the need for policies to resolve intercompany reconciliation. This, as we all know, leads to more problems down the line. It leaves us with an insatiable outcome time after another.
Reconciliation issues involving intercompany accounts are common in many companies. These problems can lead to books being kept open for longer periods of time than is necessary. To keep balances in control, a company must have tight controls. Otherwise the problem can quickly grow and become unmanageable.
Intercompany reconciliation problems are often caused by a lack in clarity or communication between departments. This could also be due to a dearth of corporate support, or simply lack of consideration. Shipping can sometimes be added to physical orders that are not included in the purchase order. If the problem is not solved by the end of the month, the purchasing department might not pay the shipping cost.
Intercompany charges is another issue many companies face. Intercompany charges are a common problem for companies. They charge their subsidiaries based on their working capital to encourage them to keep their working capital low. Unanimity over the calculation of these charges can also cause an imbalance in intercompany accounts. A lack of clarity in passing the charge or an unwilling acceptance of the charge could lead to an imbalanced situation.
Policy Control
The lack of education and top-down policies are the main causes of many of the underlying problems. These policies include:
* General reconciliation practice
* Reconciliation responsibility
* A specific format is required for reconciliation
* Internal control responsibility
* Transfer pricing
* Foreign currency
* Intercompany cut off policies
* Formal confirmation procedure
* Dispute resolution
Managers and staff from the Financial departments don’t have the time or the resources to address these issues. We don’t have the time to deal with these issues if we do have any spare time. This is because intercompany reconciliation would quickly consume our time and many other priorities.
A Detective Tool
An account reconciliation system is a great solution. This system will simplify the tedious work of identifying transactions that are not matching. This tool will allow you to save time and simplify the manual checking that goes with creating top-down policies.
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