Widespread Intercompany Issues Impact Corporations’ Business, Finance & Accounting Operations

By: DigitalCFO Asia Newsroom | 22 Dec 2021

New Survey Shows Widespread Intercompany Issues negatively impacting Business, Finance & Accounting Operations

Nearly Two-Thirds Report Intercompany Issues Increase Employee Stress with 90% Reporting All-Nighters to be a Regular Occurrence

According to a new survey “The Reality of Intercompany” conducted in November 2021 by FourQ & Dimensional Research from 106 finance & accounting professionals from MNCs, a startling 96% of respondents report challenges with intercompany, with near total agreement (99%) that critical accounting responsibilities are becoming more complex and challenging.

Finance and accounting professionals at multinational corporations with intercompany responsibilities believe that intercompany is a largely misunderstood concept (86%) that has significant negative impact to business operations and, disturbingly, takes a toll on employees’ daily lives. An astounding 90% reported their finance and accounting staff pull all-nighters at least once a year due to intercompany issues.

“Intercompany is a complex and difficult function that frequently flies under the radar. Three quarters of respondents reported that intercompany volume at their corporation was two to 10 times that of their revenue, while an additional 18% cited intercompany volume that was more than 10 times revenue. Intercompany is causing significant and myriad issues across multinational corporations.”

Diane Hagglund, Founder and Principal of Dimensional Research and author of the study

Key findings in the report include:

  • Intercompany is a mess and only getting worse: Almost all (97%) of respondents say challenges within intercompany have a negative impact on business outcomes. Nearly half of respondents report that overdue intercompany balances create business uncertainty (49%), increase risk of SEC investigations (43%) and cause missed tax deduction opportunities (43%). Nearly half (48%) report unreconciled balances that are more than five years old.
  • Intercompany issues negatively impact the accounting, finance and tax operations while stressing the teams: Nearly all respondents (97%) say challenges with intercompany have a negative impact on finance and accounting operations. Concerningly, 98% say intercompany issues negatively impact their employees. Specifically, 60% of respondents report that their company’s intercompany processes increase stress among team members causing physical or mental health issues. Well over half (57%) report that employee churn makes it harder for the remaining team to resolve intercompany issues.
  • ERPs only partially solve intercompany issues; Improved technology holds promise: 96% of respondents agree that ERP systems only partially solve intercompany challenges. An almost equal amount (97%) say they would benefit from better technology capabilities for intercompany, with automated intelligent intercompany analytics and reporting topping the list (68%). Other capabilities that would improve intercompany operations include end-to-end transactional transparency for all intercompany stakeholders (56%); centralized dispute management (55%); automated cost and tax allocation (55%); automation of manual intercompany processes (50%); and allocated vendor invoice management (47%).

“These survey results confirm what FourQ has long known to be true about the state of intercompany. Difficult to manage, intercompany has become a huge drain on many multinationals’ valuable resources,” explained Jeremy Womer, CPA, Chief Customer Success Officer at FourQ. “Even with extensive and costly modifications, ERPs rarely can manage the complicated intercompany processes of large corporations. As a result, more and more companies are turning to the technology and discipline manifested in intercompany financial management.”